by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
STOCK MARKET RATING … 3.0 (0-4 bearish, 5 neutral, 6-10 bullish). Still no change as the market continues to follow the inflation trend – Fed rate policy – economic slowdown – corporate earnings cycle. The weekly bear/bull battle is likely to continue. Most investors are looking for another large interest rate hike by the Fed at its early November meeting, although today’s activity in the Bond markets indicate they think the rate hike will be moderate.
EQUITY MARKETS and the ECONOMY … Since October, the number of days the market closed much higher than it opened are dominating the action, by a 2-1 ratio. Assuming today closes significantly higher, which it’s on pace to do, that will be three days in a row the market will have closed much higher than it opened. In addition, the market is up three weeks in a row, the first 3-consecutive-up-weeks this year, and is on pace for a fourth. To me, these are signs of positive/bullish momentum.
It’s a bit early to make a call that the trend is reversing, because it’s unclear what is causing this. It could be temporary bullishness after such a long sell-off, or slowing inflation, or hopes that the Fed will slow down it’s pace of rate hikes, or good corporate earnings reports so far this quarter, or an economy that is holding up better than expected. Or all of the above.
Of particular note, bond market interest rates are moving sharply downward today. Frankly, what the bond market thinks dwarfs what the stock market thinks, simply because the amount of money invested in the bond market is 7-10 times bigger than the stock market.
However, the consensus of Fed watchers is still for a 75bp rate hike by the Fed. Aggressive rate hikes are likely until interest rates exceed the inflation rate. Investors are likely to grow more cautious in the days ahead, so late this week and early next week is likely to see neutral to bearish price action.
Keep in mind it’s impossible to predict daily price action, because that is driven so much by what is in the news. So, this is just a thought scenario for what is likely to happen, absent any meaningful news. Developing such a scenario helps us evaluate the true impact of news events.
Oil exploration and healthcare companies continue to be the best performing sectors of the market.
PORTFOLIOS … After reading this report, if you are unsure what to do with your portfolio, call me to discuss your circumstances and I’ll explain what ought to be done to help your situation.
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TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018 and are doing better than the market return since that time period.
Learn from the Bible: Proverbs 15:22, 21:5, 22:3, 27:12 and 3:56, Joshua 1:9, Ecclesiastes 8:7, 1Chronicles 12:32 and 29:11-13, and James 4:13-16. Also, Proverbs 12:5, 15:22, 21:5, 1 John 4:1, Ephesians 1:17
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Opinions in this post are for general information only and are not intended to provide specific advice to, or recommendations for any individual, without our complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss. Past performance does not guarantee future results.