We have now put three positive weeks in a row for the indexes and averages.
Some would point to a belief that the Federal Reserve will “pivot” on its path for raising rates.
I think that is a bad choice of a term.
The Fed will raise the Fed Funds rate 75 basis points in November without a doubt.
The next rate increase after that was thought to be another 75 basis point move.
Last week, there was chatter that the Fed might just move 50 basis points and then wait and see what the data on inflation and the GDP would show over a period of time during the spring of 2023.
With that thought in mind the S&P 500 stock index bounced back off 3600 and climbed over 200 points.
It really shows you how much money is sitting on the sidelines waiting to come into this market.
What I am concerned about is there are so many issues economically in Europe, concerns about Taiwan, the war in Ukraine and whatever the next Middle East problem will be will impact the world’s economy as much or more than rising interest rates.
As a country, we have amassed an amazing amount of debt that will have to be repaid sooner than later.
You don’t have to go far to find issues to be concerned about.
Maybe that is the legendary “wall of worry” that indexes and averages seek to climb over.
What was of real interest to me last week was the fact that old line companies such as AT&T and IBM posted better than expected earnings.
Phillip Morris did the same thing in an industry given up for dead.
It appears the whole world is not in fact rotating around Silicon Valley after all.
It also appears to me that we are certainly not in a current recession.
This is where value investors make money finding great companies that turn things around.
That is not to knock the FANG stocks as they are market leaders.
Of course that can go in both directions as the recent trading history has proven.
I would say though that once the Federal Funds rate gets near to above 5%, many investors will take their cash and put it where there is little or no risk.
That can and has dried up demand for stocks.
I know most have forgotten what the 70s were like, but most people just chased higher CD rates from bank to bank.
As a consequence the market didn’t move much at all.
It was more like Chinese water torture. I am not forecasting a downward spiral in equities, but a possible shift in investors’ attention from stocks to bonds.
