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Any day stocks drop first and people scramble after the fact to concoct an excuse for the selling is less about the "negative catalysts" than the economic fundamentals. Days like that are nothing more than another random walk for Wall Street, giving our stocks more room to outperform.


Admittedly, there wasn't a lot of outperformance anywhere yesterday, which once again makes us suspect program selling or even a hedge fund liquidating positions across the board to raise cash. A full 95% of the S&P 500 and a breathtaking 29 out of the 30 Dow industrials (everything but Walmart) lost ground, along with every single sector and all major mutual funds focused on any U.S. stocks except the gold miners. While the selling wasn't deep, it was definitely broad.


We're never thrilled to see our recommendations drop but there's some comfort in seeing our Real Estate stocks swim upstream. When Office Properties Income Trust (OPI: $30, up 1% this week), Omega Healthcare Investors (OHI: $43, up 1%) and Service Properties Trust (SVC: $25, down 1%) defy 95% of the S&P 500, you know the market is reaching for the kind of yields these previously neglected companies provide.


Likewise, BlackRock Income Trust (BKT: $6.15, up a penny) gained ground yesterday, along with Dollar Tree (DLTR: $112, down 3%) as the ultimate defensive Consumer stock. More surprisingly, Roku (ROKU: $108, up 1%) joined them. Evidently not everyone is worried about the economy freezing over and killing all growth companies. This one has been unstoppable for good reason, and its success reveals a lot about the market's real mood.


All in all, the BMR universe is withstanding the selling a little better than the market as a whole. Admittedly, there's a lot of retreat on our screens this week, with everything in many of the portfolios feeling the pain, but because so many of our stocks already corrected last month, they just aren't falling as far now. This is the time when we can confidently buy the early signs of a rebound when we see them.


After all, we don't see a lot of logic driving this downswing. Stocks opened down and then hours later rumors started circulating to explain the dip. Evidently early trade negotiations aren't going well (although this news is changing this morning). The Trump administration is hinting at banning Chinese stocks from pension funds and reducing market index exposure to the country. Some Chinese companies are suddenly coming under scrutiny for humans rights violations.


We find those explanations less than compelling because most of the stocks that dropped yesterday aren't Chinese and don't do a lot of business there. Walmart still relies on Chinese suppliers so it's theoretically vulnerable to another trade war escalation . . . and yet that stock edged up yesterday.


Any explanation that doesn't really match the evidence becomes just another failed theory. In the absence of anything better, we suspect the real truth is that tired investors stepped to the sidelines to raise cash ahead of earnings season, which starts a week from now. When we see our first 3Q19 numbers, we'll all know a lot more about how strong Corporate America is. For now, we watch and wait.


But the data point we find most compelling yesterday was actually constructive. The Fed is going to start buying Treasury bills again in order to ease pressure on overnight bank-to-bank lending rates. Chairman Jay Powell was very clear that this is not "quantitative easing" because the goal is not to stimulate the economy like the Fed did after interest rates hit zero after the 2008 crash. As far as he's concerned, we don't need it.


However, the Fed reentering the short-term bond market will naturally create added demand for Treasury bills and so depress their yields. This is a way to bring down the short end of the partially inverted yield curve, relieving what was recently an ominous signal of a recession ahead. A lot of companies depend on a normal yield curve to make money. If the Fed gets its way, the cost of borrowing in the short run will soon decline below the interest rate on longer-term securities like mortgages.


That's a good thing. Let the trade war rumble. The Fed is doing a lot of heavy lifting behind the scenes. And as the yield curve heals, we challenge anyone to argue that a recession is imminent and inevitable.