Goldilocks Effect

When market sentiment is optimistic there are a lot of positive terms like Goldilocks Effect just coming after the Santa Claus Rally and Window Dressing, replacing the pessimistic terms of Black Swan and Grey Rhino. The Goldilocks Effect is a cognitive science in relation to development psychology depicting a state of just the right amount, neither too great nor too small in case of coming hazardous situations of preparing porridge and 3 bears in the fairy tale of Robert Southey. Now is used to describe the current situation of economic expansion but would not lead to inflation, when everyone is waiting for soft landing and growth must come but at the same time not so high a growth to keep up inflation that rate hike cycle can be ended soon and rate cut cycle can come earlier.

Goldilocks Effect

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When market sentiment is optimistic there are a lot of positive terms like Goldilocks Effect just coming after the Santa Claus Rally and Window Dressing, replacing the pessimistic terms of Black Swan and Grey Rhino. The Goldilocks Effect is a cognitive science in relation to development psychology depicting a state of just the right amount, neither too great nor too small in case of coming hazardous situations of preparing porridge and 3 bears in the fairy tale of Robert Southey. Now is used to describe the current situation of economic expansion but would not lead to inflation, when everyone is waiting for soft landing and growth must come but at the same time not so high a growth to keep up inflation that rate hike cycle can be ended soon and rate cut cycle can come earlier.

The Beige Book showed economic activities slowed down but tourism was healthy, when people are worrying about recession, the GDP showed a great rise of 5.2%. It wiped off worries of recession, but would re ignites uncontrollable inflation when PCE (QoQ) rose from 2.5% to 2.8%? No! For the market expectation is 2.9%, it is lowered now. So it draws our attention to Core PCE and Initial Claims tonight and tomorrow’s employment report will be postponed to next Friday.

How about the Fear & Greed Index? It is at 64 points in the Greed Zone and still has room for rising before reaching Extreme Greed Zone which means the market has high hopes on Window Dressing and Santa Claus Effect. Who can be sure there is no recession, because of the Artemis Project of Landing of the Moon already re
started in 2022, it is the strongest backup of employment.

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