After over two months we had a down week.
To say it was overdue is an understatement.
Some act like it’s sign of things to come.
What is to come are earnings reports.
All the momentum based on Fed cuts to interest rates are great, but the real engine of equities are growing earnings and cash flow.
We will get the financials this week, which should be good.
In statistical news last week, we added more jobs signaling that the economy is yet to slow down.
That, of course, is in the rear view mirror and there are indications that companies are preparing to furlough workers due to productivity gains.
There is little on the horizon that would lead one to conclude that the economy is slowing.
As such, it seems that the equity markets have what they need to advance further north.
That is not to say however there are a myriad of other issues that could prove an obstacle.
The problems in Gaza fostered by Iran no affect shipping going through the Red Sea, which will lead to higher prices for goods.
The war in Ukraine may never end.
We have seemingly come up with a funding proposal for the Federal government, but it is substantial to say the least and Congress only knows how to spend money. I could go on but it would only be piling on to a situation that, while daunting, is far from catastrophic.
If the rate reduction optimism isn’t enough, the over exaggerated optimism about where AI will take us is at least wind in the sails. We’re also seeing more mergers and acquisitions especially in the health care sector.
We shall see if our Federal Government will intervene in each and every case.
The business of making money is not all bad and it is that which employs people.
The motives of these moves somewhat resemble shutting down the country to fight COVID, which now is coming under scrutiny as bad policy.
You never know what can come out of nowhere and upset the apple cart.
I did find it interesting this week to see that Verizon has the highest dividend yield. The company has seen its value rise significantly over many analysts’ projections of underperformance.
It is an example of how an investor can have their cake and eat it too.
I am looking at several regional banks that fit this mold.
They come with risk, but that is part of the game.
I continue to feel optimistic about where the equities markets are headed this year - even beyond the Magnificent Seven.
Only time will tell who is right.
