I'm already deeply indebted to the super-smart Dion Rabouin for many of the insights driving this uncommonly markets-heavy edition of Edge. Dion will be writing a daily markets newsletter for Axios starting in early January; sign up here.
Illustration: Aïda Amer/Axios
We seem to have come to the end of one of the most astonishing bull runs in stock-market history, and there's very little indication that Fed chair Jay Powell particularly cares.
Now, interest rates are returning to normal, and stocks have fallen back about 15% from their highs. Valuations remain pretty healthy — the S&P 500 is trading at about 15 times earnings — and in general the stocks that have fallen the most are also the ones which had previously risen the most. Facebook, for instance, might be down 42% from its high in July, but it's still up more than 250% over the past 6 years.
The big picture: Powell is not an economist; he's a capital-markets banker. Weirdly, that makes him less concerned about markets than his predecessors with economics PhDs. Much of financial economics is based on the efficient markets hypothesis, which says that market moves convey important information. That causes central bankers to get worried when markets fall. Bankers, by contrast, are well aware that stock valuations are largely arbitrary, and realize that volatility is normal.
Axios' Courtenay Brown asked Powell this week about the way in which the market has reacted to his speeches. Previous Fed chairs took great pains to choose their words carefully, lest the markets read something into them that wasn't there. Powell's different: he doesn't care.
The bottom line: Powell will continue to make pro-forma noises about paying attention to financial markets. But he's not going to let Dow vigilantes dictate U.S. monetary policy.
Go deeper: Why the Fed was right to hike.
Almost everything going on in the world is bad for the economy, writes Dion.
Global central banks mostly can't come to the rescue.
The Fed is the only central bank that could realistically help the stock market. The market goes up (like on November 28) and goes down (like on Wednesday) according to its optimism or pessimism about whether the Fed will stop raising rates.
The bottom line: A U.S. recession isn't imminent, but with all the bad news around the world, it's hard to see why U.S. stocks should be moving higher. The only bid in the market comes from whatever hope remains that Powell will ride in on a white horse to save the day. After all, that's what the Fed has generally done in the past.
Should markets really care whether various government agencies are open or not? Yes.
The bottom line: This shutdown will see a million households, more or less, going without pay at the height of the holiday season. That's a big deal.
The stock market decline comes despite a record level of buybacks — more than $200 billion in the last quarter alone, up some 58% from a year ago.
Why it matters: It's a lot easier for companies to reduce buybacks than it is for them to reduce dividends. If and when earnings start to decline, it should be quite easy for buybacks to fall in tandem.
Happy holidays from me, and from the Cute Axios Robot, to all of you.
Go deeper: The robot illustrated a story about how the U.S. can head off a robot apocalypse and meet the challenge from China
Illustration: Lazaro Gamio/Axios
One oddness about the current market is that the meltdown in secondary markets seems to have had very little adverse effect on primary markets.
My thought bubble: Normally a market swoon of this magnitude would slam the window shut on primary deals. But all those buybacks and dividends need to get reinvested somewhere, ideally in an asset class that isn't plunging in value on a daily basis.
You've stopped reading already, haven't you?
Markets will not fall on Tuesday. Every major stock exchange around the world is closed for Christmas — and in some cases Boxing Day, too — except those in Shanghai and Japan.
One thing of note: It's the Fed's birthday!
Built in 1884 on a five-acre site from a design by Charles William Stephens, Harrods is one of the largest stores in the planet.