Home About Archives RSS Feed

@theMarket: Will Record Highs Beget Record Highs?

By Bill Schmick
iBerkshires columnist
As third-quarter earnings wind down, the Fed cut interest rates again this week. Since both events seemingly matched investor expectations, what, then, will investors worry about in the coming months?
 
As predicted, the S&P 500 Index hit a modest new high this week based on the central bank's one quarter-point cut of the short-term Federal Funds interest rate on Wednesday. Robust earnings from certain favored companies, like Apple and Facebook, also helped sentiment and so the averages ground higher.
 
"You would think," said one miffed investor, "that after two years trapped in a trading range, we would have had a little more enthusiasm over this break-out."
 
Instead, traders simply took it in stride and actually took profits. One reason for the lack of enthusiasm could have been that investor sentiment was already bullish. The averages simply confirmed what we all expected would happen. Investor sentiment seems to confirm that.
 
The U.S. Advisors Sentiment indicators released this week had market bulls pegged at 54.2 percent versus 52.8 percent last week. From a contrarian point of view, any reading above 50 percent should invoke some caution among the trading crowd. At the same time, the number of pros who are expecting a market correction declined to 28 percent from 29.3 percent. Readings under 30 percent also signal a more cautious approach to the markets.
 
On the plus side for the markets, we are now over the September-October period when stocks usually do their worst. November through January is normally the best of the best months for positive stock market performance. The question is whether historical data matters at all, given markets where politics mean more than fundamentals.
 
The trade war, in my opinion, will continue to cast a sobering shadow over the stock markets in the months ahead. As readers are aware, I thought this "skinny" deal between China and the U.S. was a joke. It seems that more investors are now realizing the same thing. The president's latest "phase one trade deal" is much more a public relations stunt and less a meaningful breakthrough. The Chinese seem to agree.
 
The hope of signing even this paltry deal has now been postponed, since Chile canceled the upcoming November conference (due to political unrest) where Xi and Trump were supposed to meet, greet and sign the deal. Investors worry and wonder whether any deal will be signed at all. In my opinion, it is simply more of the same drama we have been putting up with for the last two years.
 
Thursday, for example, "unnamed officials" in China let it be known that they did not hold out much hope that any substantive deal with Trump would ever be signed. The markets dropped immediately. So, what's next? We should expect either Trump (through tweets or an impromptu Q&A with the fake news) or some administrative official (it is usually former CNBC fake newsman, Larry Kudlow) to run out and to assure us all that everything is just perfect, that the economy is great, that negotiations are going better than expected, yada, yada, yada.
 
It comes down to this: investors and the nation are ping pong balls in this global trade game. How you deal with that depends on your level of cynicism. Should you believe those "no good Chinese," or in the honesty and sincerity of the self-described "greatest president in the history of the United States?"
 
Aside from that drama, we have the impeachment inquiry that is heating up and coming to the attention of more and more Americans. I expect that Trump, in an effort to strike back at the Democrats and change the focus of the nation away from impeachment, may create a confrontation with the outcome being a possible government shutdown later this month. I warned readers in my column last week that there is a high probability that the president will use funding for his wall as a pretext to shut down the government once again -- just in time for Thanksgiving.
 
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 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.
 

 

0 Comments
     

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
Tyer Offers Compromise That Would Restore Indoor Dining
Drury Senior Katie Booth Presented with Superintendent's Award
Williamstown Planning Board Hosts Wednesday Panel Discussion on Cannabis
CSX Acquiring Pan Am Railways
Managing Your Retirement Plan Under a New Employer
Second Positive Test Sends Mount Greylock to Remote Learning
Baker: COVID-19 Vaccine Rollout to Begin This Month
Lanesborough Sets Tax Rate for Fiscal 2021
Some Brayton Students Switch to Remote After Positive Case
Holiday Events and Tree Lightings 2020
 
 


Categories:
@theMarket (351)
Independent Investor (450)
Retired Investor (22)
Archives:
November 2020 (8)
October 2020 (7)
September 2020 (6)
August 2020 (6)
July 2020 (10)
June 2020 (7)
May 2020 (9)
April 2020 (9)
March 2020 (5)
February 2020 (7)
January 2020 (10)
December 2019 (7)
Tags:
Stocks Banks Recession Bailout Stimulus Markets Retirement Pullback Wall Street Federal Reserve Euro Greece Selloff Energy Fiscal Cliff Rally Interest Rates Debt Ceiling Deficit Housing Europe Congress Taxes Crisis Jobs Europe Stock Market Commodities Economy Debt Currency Japan Oil Metals Election
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Market Cyclicals Take the Lead
The Retired Investor: Pandemic Has Been Good to Pet Industry
@theMarket: Markets Are in a Tug of War
The Retired Investor: The Rise of RCEP
@theMarket: Vaccine Hopes Send Stocks Higher
The Retired Investor: Small-Town America Is in Vogue
@theMarket: Markets Enjoy a 'Biden Bounce'
The Retired Investor: Polling Business Takes a Body Blow
The Retired Investor: Food Faces Escalating Prices
@theMarket: Politicians Play Cat & Mouse With Investors