As the weight of the world presses down on the shoulders of U.S. stocks, there's a growing—but, I think, false—belief that it'll be "Fed to the Rescue!" when the rate-setting panel meets tomorrow and Wednesday. Not only is the current state of unease still far too mild to spur the Fed chief into action (as I argued 10 days ago), but the majority of threats to investor confidence currently happen to be domiciled overseas.
If our own tepid profit picture wasn't enough to contend with, today there are no less than 7 different headwinds from abroad, making the way forward look an awful lot like a ski slope. The bad news includes: the threat of the Dutch government dissolving; French voters seeking a new direction; German manufacturing screeching to a 3-year low; Eurozone and Chinese PMI both indicating contraction; Italian consumer confidence hitting a record low; and Spain officially sliding back into recession, which follows in the footsteps of its 23% unemployment rate.
With friends like that, who needs enemies?
"On the upside, we've got a lot of U.S. data later this week, and we're going to look relatively good," Macke offers in the attached video. "The downside is that there is absolutely no compelling reason to step in front of this ongoing freight train. It's just too ugly out there."
Indeed it is. And yet, all year long as markets gurgled higher and higher, we were constantly reminded that all we really needed was a little pullback in order to allow fresh money a chance to get in the game—then stocks would be able to carry on to their next new high. But now that it's here, and the S&P 500 has actually shed over 4% from its 52-week high of 1422 set April 2, the "buy the dip" crowd is suddenly stricken with fear and nowhere to be found.
Which brings us back to Wednesday, the Fed, and Bernanke's quarterly press conference, which follows the FOMC rate decision and statement. With solutions to our current crisis looking rather scarce, and considering that Europeans are notoriously pokey with their interventions, some will see this as the perfect time for Fed redemption. That's because their last official statement (the release of the minutes from their March meeting on April 3) resulted in a 5-day tantrum since it lacked any mention of further easing or QE3.
But here's the catch: it's not whether more stimulus is right or wrong, it's that investors can't seem to live without it. So if you are thinking the ease-addicts are any less wanton today for some free money from the Fed than they were 20 days ago, think again. And get ready to be disappointed twice in the same month.