12:00 TUESDAY – Stock Market Report #182 – 11/1/22
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 in rating as the market continues to follow the inflation trend – Fed rate policy – economic slowdown cycle. Corporate announcements of current earning are generally good, but statements regarding future earnings are full of warnings. Investors are looking for another large interest rate hike of 75bp (3/4 of 1%) on Wednesday. See more below.
EQUITY MARKETS and the ECONOMY … Stocks have been behaving well because the inflation rate has been coming down, and many think the Fed is going to Pivot.
First, as a result of Federal Reserve policy of increasing interest rates to fight inflation, general inflation has been coming down. The Federal Reserve thinks the unemployment rate will peak at 4.4% as a result of tightening interest rates. That seems aggressive to me. I believe a peak unemployment rate would be more like 4.8% - 5.0%, especially since inflation has proven to not be “transitory”.
Next, all eyes are on a “Fed Pivot”. What that means is the Fed will be altering (pivoting away from) it’s trend of large interest rate increases (75bp hikes) in favor of a more moderate pace of interest rate hikes (50bp hikes) after this weeks Fed meeting. Believers in a Fed Pivot think the chances of a probable softer landing (a milder recession) have increased.
Note: increased stock buying led to Investor’s Business Daily (IBD) issuing an FTD Alert (“Follow Through Day”) Alert
(Explanation - from www.investors.com: A follow-through day essentially tells investors when to start buying quality stocks again, as-and-when a quality stock breaks out past its “buy” point. In the more than five decades since William O'Neil began tracking this signal, the IBD founder says he's never seen a Bull Market that didn't BEGIN with an FTD. An FTD occurs when a major market index <DJIA or S&P-500, etc.> closes more than 1% above the prior 4 trading days on rising volume.)
While their research says every Bull Market BEGINS with an FTD, BEWARE, it does not say that every FTD BEGINS a Bull Market. We do not know how many FTDs occur in bear market rallies, or in everyday trading. So, at best, this FTD Alert COULD be signaling a potential market bottom if a whole lot of other things behave as expected.
Agree or Disagree, your choice, here is a strong statement from Labor Secretary Walsh -- “I’ll tell you right now if we don’t solve immigration ... right now, we’re talking about worrying about recessions and inflation. I think we’re going to have a bigger catastrophe, if we don’t get more workers into our society, and we do that by immigration.”
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.
Excelsior Divitiae. 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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