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Daily Market Update – October 5, 2016 (7:30 AM)
There really is very little reason for the market to do much of anything until Friday, when the Employment Situation Report is released. That seems to be the case this morning, as it had the two previous mornings this week, although there were some times as trading ensued after the opening bell that the market seemed to forget what it was waiting to hear. One thing that did become clear is that there are interest rate jitters. Another thing that has been abundantly clear is that whoever is calling the shots and creating market unease about interest rates, just simply isn’t a student of history. Instead of panic over the thought of a 0.25% interest rate hike, there should be concern that the economy can’t support even more, now that we’re approaching our 7th year of recovery. But if those selling off at the mere thought of an interest rate increase would only look back in time, they would see that the early stages of rate increases are a great time to be accumulating stock. That makes sense and for once, or maybe on just this rare occasion, something that makes sense had actually been the thing that had happened in the past. That is, in the past, the early stages of interest rate increases reflected an expanding economy that was then reflected in the top and bottom lines of companies. That in turn expanded earnings, which we all know is tied to a stock’s price, or at least should be. Those are the very basic fundamentals upon which investing has always been based. Maybe not trading, but investing. So, even as we sit near new all time highs, there’s reason to think that an old fashioned expansion of the economy will lead us even higher. Last week saw 5 days with triple digit moves, yet the market itself only ended with a net 0.2% gain. I tend not to think in terms of unbridled enthusiasm, but I would definitely like to add to my cash reserves to have an opportunity to pick up anything that may take a move lower, in anticipation of some sustained moves higher. For now, I would just like to see some assignments of positions in October, stockpile some cash and then consider re-deployment as early as Election Day week, even as there could be a sell-off when the news of an interest rate increase does finally arrive.
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