12:00 TUESDAY – Stock Market Report #139 – 11/9/21
by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
MARKET RATING … Staying at 7 (where 0 - 4 is bearish, 5 is neutral, 6 - 10 is bullish). We entered a rally phase on Wed 10/13. While my risk concerns are diminished, and my optimism is rising, we are in danger of a melt-up phase to extreme prices.
THE FED … The Federal Reserve announced they are reducing (tapering) their bond buying by $15B each month, so in 8 months the bond buying will be finished, and the Fed will no longer be injecting money into the economy. Sometime thereafter, the Fed will probably raise interest rates. The expectations are for two 25bp increases, or ¼ of 1% for each increase. So, interest rates may be ½ of 1% higher by the end of 2022.
The market has reacted favorably to this development, indicating participants realize money is too easy, rates are too low, and inflation is increasing. This change in policy was expected, it was long overdue, and the markets are liking it.
ECONOMY … Some items decreasing: personal income, real US Sales, industrial production, construction spending, and productivity. Certainly Covid-Delta has had an impact. Some items lower but still positive: 3rd quarter real GDP. Some items increasing: consumer prices, consume debt, and the ISM services index.
Altogether, higher inflation, leading to lower incomes, leading to more consumer credit card debt, leading to reduced GDP growth, are not good trends. However, these trends may reverse in coming months as the effects of Covid-Delta diminish. We will be watchful.
EARNINGS … So far, 3rd Qtr. earnings, and/or forecasts for the 4th quarter, continue to be better than expected, so Mr. Market will probably head up for a while. Consequently, I’ve made several new commitments with our available funds.
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