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“As the week, and indeed the much-feared month of October came to a close, the “buy-the-dip” strategy once again was rewarded”
Highlights and Commentary in This Week’s Edition:
- The training wheels are off as the Fed’s QE ends; economic and earnings data show sustainable recovery;
- Our price target exceeded, we raise it to 2,080;
- Energy prices not just the economy;
- Market celebrates election clear outcome and fundamentals;
- Investor year end housekeeping: profit-taking and tax loss harvesting looms;
- Recent economic and market charts: including ISM, payrolls, Baltic Dry, and the VIX.
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With the Federal Reserve ending its quantitative easing program as well as positive economic data and rising corporate earnings pointing to the sustainability of the current economic expansion, the training wheels stateside appear at long last to be off.
From our viewpoint on the radar screen, the market celebrated last week both a clear outcome in the midterm elections as well as celebrated the fundamentals that have driven the stock market higher with increased clarity and conviction over the last few years.
From last week’s ISM non-manufacturing number to the weekly initial jobless claims, to the monthly ADP jobs report to the Labor Department’s non-farm payroll number and the downtick of the headline unemployment number that moved lower to 5.8%, the sustainability of the current economic expansion appeared to gain greater credence and cut into investor skepticism that had taken the bull market hostage as recently as last month.
With elections in the rearview mirror, Ebola being dealt with (or at least off page one of the daily business section), improving fundamentals and double digit 3Q earnings growth for the S&P 500 underpinning sentiment, investors will likely now turn to year-end house-keeping chores that include some profit taking, tax-loss harvesting, portfolio rotation along with pondering what lies ahead beyond the holidays.
With interest rates low, recent declines in oil and gasoline prices and a strong dollar making imported goods more affordable, shoppers this holiday season could feel the jingle in their pockets and celebrate with greater enthusiasm and gifting.
“….Goin’ through them Changes…”
The energy sector, which delivered the second best performance among the S&P 500’s ten sectors in the first half of the year rising 11.66%, has delivered the worst performance among the sectors from the start of the second half through last Friday—posting a loss (curiously enough) of 11.66%.
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