MARKETS TODAY Oct 11 (Vica Partners) – The S&P 500 up .17% as of 12.54 p.m. Eastern. The Dow Jones Industrial Average up 253 points, or .87%, to 29,456. The tech based Nasdaq up .01%. We do expect small gains today!
Stocks continue to flip flop Tuesday with indexes testing lows as the markets desperately looks to the Fed for next steps. The 10-year Treasury note yield is up at 3.916%. U.S. Dollar Index (DXY) is slightly up at $113.21.Oil prices negative today with Brent crude -1.95% and US West Texas Intermediate crude -2.06%.
PERSPECTIVE
The US economy is at the beginning of a Fed-induced cooling cycle. The markets overreaction to rising rates needs a refocus and here is why…
- Over the last two decades rates regressed to close zero with on average less than 2.5% inflation. In 2022 the US central bank has raised rates from zero to 3.25% to fight +8% inflation.
- Rising rates, and more so long-term rates have a delayed economic effect. It usually takes at least 12 months for a change in this interest rate to have a widespread economic impact, while the stock market’s response to a change is more immediate.
- Pricing, past COV 19 lockdowns and supply-chain disruptions effected the economy’s productive capacity, elevating prices.
Employment data released last week showed a decline in the ratio of US job openings
Simply the reports suggests that companies are relying on less workers to do more work, resulting on higher wages.
Reports out this Week
Our teams are not expecting any surprises and look for on forecast projections reflecting stubborn but in control inflation levels.
- Wednesday
- Producer price index Sept. forecast : 0.2% last month: -0.1%
- Thursday
- Core CPI Sept. forecast: 0.5% last month: 0.6%
- CPI (year-on-year) Sept. forecast: 8.1% previous: 8.3%
- Core CPI (year-on-year) Sept. forecast: 6.6% previous: 6.3%
- Initial jobless claims forecast: 215,000 last month: 219,000
IMPORTANT TO READ as low interest rates will return
The Federal Reserve will be forced to cut interest rates in 2023 if a deep recession occurs as the cure for inflation is not just raising rates. As we see a significant policy change coming by late Spring of 2023 with Powell reversing direction… just look at 12 month declining lower commodity pricing and new reports on rising retail inventories.
Yearly commodity prices will rise “as there are production shortages” which include: iron, copper and crude oil. Upside will continue!
Solid strategy for these type of market days ….
We suggest investing in companies that have solid balance sheets and offer dividends.
Best to continue to cost average buy value stocks and resist most all tech and growth stocks where companies have negative margins. Our Teams forecast a negative 5-7% valuation correction for speculative stocks. DON’T try to time market lows!
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in S&P 500 Year to Date and will regain strength shortly
