If timing is everything, how come it ain’t in ye olde financial markets, as a myriad of experts will tell you? 

Here’s what they really mean: Of course timing is everything, even in investment decisions, but we don’t want to be wrong, so we advise not timing the market even as we tell you to buy or sell.  Even more infuriating is the fellow who’ll tell you he was right but his timing was off!

Well, gentle reader, we’re that second fellow.  At the end of 2016, we thought the Trump train would prove too dysfunctional in an overpriced equity market, only to watch the train leave the station without us. Toot Toot!  The S&P 500 gained more than 19% on the year and kept climbing early in 2018, becoming even more overvalued.  But who cared.  It was going to be another fish-in-a-barrel hunting expedition, right?

Nope.  Stocks took steep dive Friday after the jobs report, and the downturn piced up steam today, likely fueled by a bunch of machines that crunched sell numbers for breakfast.

As we highlighted in our 2018 outlook (see A Stable Genius Guide to 2018), we thought the yield curve would flatten and even invert, signaling recession as the Fed tightened monetary policy and longer-term yields held steady or fell as investors sought safety.

That prospect came sharply into focus on Friday with the January job report, the first piece of data in quite some time to earn the dubious distinction of being good news that’s bad news for equities.  It was the first real warning shot that the bull market was too long in the tooth to have much giddyup left.  In short, there’s little to no slack left in the labor market, and wages are finally responding, raising the probability of more restrictive monetary policy.

Now the Fed is supposed to love full employment and low inflation equally, but sometimes it has to love one more than the other.  It might be close to the point where it has to make up its mind.  The death of the Phillips Curve (which posits correlation between labor markets and inflation) has been greatly exaggerated.

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