Home About Archives RSS Feed

@theMarket: Mushy Markets in March

By Bill SchmickiBerkshires Columnist
Investors took a break this week from the ongoing Trump rally, even as the pace of change in Washington seems to be accelerating. Both the financial downside and political upside should be positive for your investment portfolio overtime.
 
The minor consolidation I have been expecting in the stock market began this week. The averages have pulled back a little, but the S&P 500 Index, for example, has lost less than one percent from its all-time highs. That's not exactly the end of the world ...
 
I see a meandering two steps back, one step forward, kind of market with the downside risk somewhere between 2,300 and 2,330 on the S&P 500 Index. That would equate to about a 4 percent move. As pullbacks go, that would be minor and necessary given the stupendous gains we've seen since November. 
 
Some readers, mostly Trump-haters,(and there are a lot of them in this neck of the woods) have asked why I am so positive on the markets right now. It's simple: hope is a powerful motivator for stock market investors. So far, that hope has been justified. 
 
The repeal of Obamacare was one of the new president's major campaign pledges. This week, Congress began work on repealing and replacing the Affordable Care Act (see yesterday's column "America's Road Toward Universal Health Care.")
 
Not bad, for a president who has only been in office for 49 days.
 
His trillion-dollar infrastructure project campaign pledge was this week's focus in the Oval Office. Work is also progressing on federal cost-cutting, while regulation after regulation is coming under scrutiny from cabinet members/businessmen who, by their very nature, hate waste and inefficiency. 
 
Bottom line, this guy is not only doing what he promised to do in the campaign, but he appears to be doing it with a single-minded purpose. So those who can be at least neutral about this president, (a hard place to be in this divided and polarized nation) he gets an "A" for effort.
 
Friday's non-farm payroll report, the first employment data that can be attributed to the Trump administration, came in much better than expected — 227,000 jobs versus an expected 175,000 gains. It appears that more than just stock market investors are hoping for a better environment. American small-business owners, who are responsible for the lion's share of U.S. employment, are among those who hope for a better business climate under Trump.
 
The question will be whether that employment number will convince the central bank to raise short-term interest rates next week. Although the headline numbers look great, the Fed usually looks at details such as whether wages also rose. They didn't. The economy, meantime, is still not growing at an accelerated pace. The Atlanta Fed actually reduced its first quarter GDP growth rate from 1.3 percent to 1.2 percent this week.
 
The Fed Funds Futures market is telling us that bond traders are nearly certain that a rate hike will occur on March 15. I believe that at least part of the reason markets have turned mushy this week is in reaction to this event. Rising interest rates, no matter how small, concern investors greatly. I believe that rising interest rates, not Trump, are the main obstacle to further gains in the stock market this year.
 
But as long as central bank policy remains moderate, with small rate hikes, spaced widely apart, the stock market can adjust and continue to climb. If, however, the Fed becomes more aggressive, for whatever the reason, then all bets are off.  
 
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Williamstown Select Board Awards ARPA Funds to Remedy Hall
North Adams Regional Reopens With Ribbon-Cutting Celebration
Clarksburg Sees Race for Select Board Seat
Crosby/Conte Statement of Interest Gets OK From Council
WCMA: 'Cracking the Code on Numerology'
BCC Wins Grant for New Automatic External Defibrillator
Clark Art Screens 'Adaptation'
Drury High School to Host End-of-Year Showcase
Clarksburg Gets 3 Years of Free Cash Certified
Pittsfield CPA Committee Funds Half of FY24 Requests
 
 


Categories:
@theMarket (480)
Independent Investor (451)
Retired Investor (184)
Archives:
March 2024 (6)
March 2023 (2)
February 2024 (8)
January 2024 (8)
December 2023 (9)
November 2023 (5)
October 2023 (7)
September 2023 (8)
August 2023 (7)
July 2023 (7)
June 2023 (8)
May 2023 (8)
April 2023 (8)
Tags:
Congress Debt Ceiling Fiscal Cliff Europe Taxes Banking Metals Jobs Election Rally Selloff Pullback Interest Rates Stimulus Greece Retirement Recession Stocks Currency Economy Japan Energy Europe Deficit Debt Markets Federal Reserve Oil Employment Stock Market Bailout Euro Crisis Commodities Banks
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
The Retired Investor: Immigrants Getting Bad Rap on the Economic Front
@theMarket: Sticky Inflation Slows Market Advance
The Retired Investor: Eating Out Not What It Used to Be
@theMarket: Markets March to New Highs (Again)
The Retired Investor: Companies Dropping Degree Requirements
@theMarket: Tech Takes Break as Other Sectors Play Catch-up
The Retired Investor: The Economics of Taylor Swift
@theMarket: Nvidia Leads Markets to Record Highs
The Retired Investor: The Chocolate Crisis, or Where Is Willie Wonka When You Need Him
The Retired Investor: Auto Insurance Premiums Keep Rising