Inflation: Good, Bad or Indifferent?

The slowing economy and rising inflation fears finally caught up with the oil traders/speculators driving the price per barrel down significantly for the past two days. Then one bank posts mediocre numbers but announces that it will increase its dividend and the market rallies up 276 points. Yet I can’t find any commentary that refers to this unhinged market shift as being unusual.

Today, inflation reared its ugly head, despite all of the government machinations of the numbers, telling us something that the consumer already knew; food and energy costs have skyrocketed. Now it appears, the bark of inflation is worse than its bite. Fears of inflation usually cause the market to plummet; yesterday’s fears bought down the cost of oil, a huge factor in helping the market to rally today. One would expect actual inflation, as reported today, to exacerbate the downward trend but apparently reality has no affect on the market; actual inflation was dismissed entirely today replaced by one faint glimmer of hope from one financial institution. Is your head spinning yet?

After the increasingly bad news of the last 3 days, investors, it seems, were chomping at the bit for any good news to the point where they disregarded the usual fear-inducing indicators. Hello! Even Bernanke was crying doom and gloom yesterday. Today on NPR they were talking about economic indicators and that we are in “uncharted waters.” No one knows what to think on a daily basis. Welcome to the current stock market where every day is like ground-hog day; there is no memory of yesterday, there is no forethought for tomorrow.