You have to credit earning reports from Wells Fargo, Citibank and Morgan Stanley sending the indexes up significantly last Friday.
And you have to acknowledge the economy has many hurdles in its path, but it is still strong.
The million-dollar question is whether the economy can just be steady as it goes. We will get a .75% raise next week, sending the Fed funds rate to between 2.25% and 2.5%.
There is no planned meeting for the Fed in August, so there should be month’s reprieve from rising inflation. There seems to be a real feeling that we might have missed
a 40% pull back and the 20% correction was all that was needed.
The upcoming earnings reports will provide significant guidance as to what DEOs feel they face over the next six to nine months.
We know we have inflation, but that is literally yesterday’s news.
The real issue is whether the Fed can orchestrate a soft landing.
I have often mentioned the odds are not in their favor. Just like Dumb and Dumber, “so you are telling me I have a chance,” after being told it is a one in a million opportunity.
People take chances on the lottery with far greater odds. The point is that optimism is a significant factor in the equities markets.
You need sellers and buyers to make a market.
I won’t go down the list of potential obstacles to the economy since you get a steady dose of the news and social media.
It is important not to focus on what has happened, but what is likely to happen.
That is why there is so much attention paid to the projections for the next six to nine months in earnings reports.
Stocks to a slight degree do trade on past performance, but seriously trade on expectations.
Positive earnings news from financials has helped the mood on Wall Street.
I am not so sure why the fact that financials feel good about the future as banks make money in rising interest rate markets.
I am more focused on the ability for tech companies to expand earnings.
Here is where we will determine if a recession is really at hand.
I am cognizant that we face rising prices currently, but I seriously worry about the impact on our rising food costs.
We will suffer lower production due to the drought, which impacts the whole country especially in the bread basket states.
You couple that with the loss of wheat production in Ukraine and we may all be avoiding carbohydrates as there won’t be any on the shelf.
The economy helping our waist line is the only positive I can come up with.
Rising rates also impact the housing market.
We have a whole generation that knows nothing but zero-interest rates.
All that said, at least the crypto world has been given a lifeline.
I’m not sure that will save investors or will it pull more in to drown.
What we will surely have this summer is a serious discussion about our future.
I won’t suggest to know what will come, but I do know that these stock levels are not a value for me.
Thank goodness for dividends while I await the answer.
