The Maxell Man Market

What in the actual fuck is driving the stock market higher? Here's two decent guesses...and why they both might run out of steam in March.

Back when the market went stratospheric in 2020, at least there was an easy way to explain it: rates were at 0%, and the Fed had just injected trillions of dollars of liquidity into the system in hopes of papering over a gridlocked economy in the midst of a pandemic with a fake economy they could conjure up out of thin air by redistributing your purchasing power in the form of new dollars.

Odious behavior, but at least I understood it to the point where 1+1 equaled 2.

Over the last couple of weeks, I’ve heard a lot of analogies that the current market feels exactly the same. It’s difficult to not watch an intraday chart of the magnificent seven or the NASDAQ and not feel like the guy from the old Maxwell cassette tape advertisements: just sitting in your desk chair with your face and hair being blown back by the jet engine-style exhaust of a skyrocketing market.

Market participant watching CNBC, oil on canvas, 2024

Given that I have been…how do you say it…dead-ass wrong about my prediction for a limit down day or a market crash since rates started hiking, I’ve been investigating further what could be causing the euphoria we're witnessing. After all, economic conditions now are essentially the exact opposite of what they were in 2020. Rates have spiked to the highest levels in recent history. The Fed is doing quantitative tightening, not quantitative easing.

I think I have found two of the key drivers that are keeping the market skyrocketing – and both of these factors could be coming to a screeching halt in just a matter of weeks.