October may come with end of month horror show promises, but the month so far has been more of a yawn.
The fact that the Dow and Standard & Poor’s 500 index is at least up a bit should be welcome given the volatility of late.
This all comes with UAW strikes, a war in Israel and continued inflation.
Most of the attention lately has focused on bond yields as the Federal Reserve issuing more debt to finance the debt us as a nation has accumulated coming out of the pandemic.
For all the concerns, the earnings from financials last week were positive.
This week there will be over 50 major corporations issuing earnings reports for the 3rd quarter.
Of course attention is still focused on whether the Fed will raise the Fed Fund’s rate next month.
The PPI and CPI reports last week did not reflect a drop in inflation.
In fact, both measures pointed to a slight rise in inflation, keeping the rate over a point and a half above the target of 2%.
It almost seems pointless at this point to keep talking about dropping rates and be more concerned about concerns that interest rates may move from the 5.5% to 7%.
It just seems that the addiction to zero-interest rates will take a while to overcome.
We lived with essentially zero borrowing costs for over a decade.
There are analysts with no concept of normal interest rates.
We don’t have high interest rates now.
It would be great to never have to pay for borrowing money, but that is not realistic.
It appears that for all the turmoil and concern, companies are finding a way to turn a profit.
Corporations are sitting on vast sums of cash as shown by rising dividend yields and stock buybacks.
The real problem is with small businesses unable to borrow from regional banks. You won’t see this on Wall Street, but it will impact the economy as this is where most of the people actually work.
This is where wages won’t be able to increase if these small businesses can’t grow.
Some of the problem has grown out of legislation trying to avoid the banking crisis from the mortgage debacle in 2008.
This legislation was targeted at big national banks, but small regionals got caught in the net.
I expect earnings to be better than projected, making it difficult for the bears to win out over the bulls this last quarter of the year.
That is not to say that we are in the clear.
We recently moved back to the 4200 level for a test.
We rebounded up over 200 points but that is no guarantee.
It really does seem that this is still a stock picker’s time to shine especially with the 200 and 100 day trend lines moving horizontally instead of vertical.