Back in early March when the Dow Jones Industrial Average and Transports were making all time highs, I wrote a piece about reflexivity and the new highs:
Executives at large companies who observe the broad market making new highs and their own stocks doing well will have a tendency to grow more confident in the economy and their own businesses and confidence has been sorely lacking.
This, in turn, might lead them to be more aggressive in conducting business and, importantly, to do more hiring than they might have otherwise. More hiring would positively affect the economy, increasing consumer spending, confidence and the like.
We may also see reflexive investor behavior. The market goes up and people become more attracted to it as they observe others increasing their wealth. This, in turn, leads to more investors getting involved and further increases in equity prices.
Last Friday’s employment numbers are a critical part of this virtuous reflexive dynamic..
The numbers improve and executives shift, again, ever more from the fear posture towards the aggressive posture where they are more likely to make new hires in turn leading to an improving employment picture…
Reflexivity at your service…
$DIA $MACRO $FED