The stock market Wednesday was shocked to hear the “I” word, and it had noting to do with inflation.
The impeachment word is being used on Capitol Hill, which took the street by surprise and sent the Dow Jones industrial index plunging 373 points or -1.8% for the day.
While the impeachment process will probably not take place and is just Democratic bluster, investors believed that the Trump Pump of tax cuts and infrastructure spending will probably be put off even further while dealing with these investigations.
So Wednesday became the Trump Dump, which many market technicians believe needed to have a sell off to build a solid bottom to move higher. The VIX index, which measures volatility, soared more than 40% yesterday and is up nearly 60% in the last 5 trading days.
This index measuring investor sentiment was below 10 just over a week ago and Thursday morning is hovering at 16, which is still on the low side historically.
Thursday morning’s futures show the Dow shaving another 100 points at the open, which would give the exchange a 2% move down for the two days, which is not enough of a shake out.
A 2,100 point move to the downside would put stocks into correction mode of being off 10% from the recent highs, which would put the Dow at around 19K.
If you look at the economic data a 10% move downward in stocks is warranted as GDP is straddling the flat line of 0% growth, while Federal Reserve projections are looking for 4% growth in the second quarter, which is pie-in-the-sky thinking.
So there are two “I” words now that can hit the market. Inflation is not the worry. Impeachment is the word du jour, but I don’t feel that word has legs from the information that is out there right now.