A perfect loss for me today.....all eight stocks DOWN. I also got beat by the SP500 by 0.38%. Nothing to do but simply forget today......it is over....and move on into the future. It is not like today is going to be some sort of critical day for me. In fact a few weeks or a month or two from now it will be totally forgotten. I am looking forward to the end of the week tomorrow.
The day today. Dow tumbles more than 300 points to notch third day of losses amid fears of higher rates, government shutdown https://www.cnbc.com/2023/09/20/stock-market-today-live-updates.html (BOLD is my opinion OR what I consider important content) "Stocks fell Thursday as Treasury yields popped to multiyear highs and investors grew worried that lawmakers would be unable to prevent a shutdown. The Dow Jones Industrial Average dropped about 370 points, or 1%. The S&P 500 slid 1.6%, and the Nasdaq Composite retreated 1.8%. It was the third straight day of losses for the three indexes and the worst session since March for the S&P 500. The Dow and S&P 500 were on track to end the week down more than 1% and 2%, respectively, while the Nasdaq was poised to fall more than 3%. The 10-year Treasury yield hit 4.48%, its highest in more than 15 years, with the latest catalyst being weekly jobless claims data showing a still strong labor market that could encourage the Fed to stay in hiking mode. Weekly jobless claims decreased by 20,000 to 201,000 for the week ending Sept. 16, much lower than the 225,000 claims expected by economists polled by Dow Jones. It was the lowest volume of new unemployment claims since January. The 2-year yield topped 5.19% after the jobs data Thursday, also the highest levels seen since 2007. “That’s kind of a warning sign for markets right now,” said Adam Turnquist, chief technical strategist at LPL Financial, of recent yield moves. He added that yields are “certainly weighing on risk appetite at this point.” Losses intensified following news that House Republican leaders sent the chamber into recess on Thursday, bolstering fears that federal lawmakers won’t pass a bill to avert a government shutdown. Market participants are concerned that a shutdown would hurt fourth-quarter GDP. The moves come a day after the Federal Reserve announced it would leave interest rates unchanged, but forecasted another rate hike before the end of the year. The central bank also indicated fewer rate cuts next year, essentially saying it would need to keep rates higher for longer because stubborn inflation. Fed Chair Jerome Powell commented after the decision that a soft landing for the economy was still possible, but not his baseline scenario. “We’re seeing a bit of a clash between, I think, what expectations are and how things are actually going,” said Shelby McFaddin, investment analyst at Motley Fool Wealth Management. “When you’re an investor ... it doesn’t seem ideal because it seems to indicate a prolonged higher interest rate environment.” Tech shares have led the losses this week as investors rethink buying growth-oriented stocks if interest rates remain high. Tesla,Alphabet and Nvidia all lost more than 2%. FedEx bucked the negative trend, gaining 4.5% after the delivery company posted adjusted earnings of $4.55 per share in its fiscal first quarter, while analysts called for $3.73 per share, per LSEG." MY COMMENT OMG.....three down days in a row. Run for the hills. Notice how the impending GOVERNMENT SHUTDOWN is now being brought into these stories. I have been through at least 5-10 government shutdowns in my life. GUESS WHAT......none of them did or meant anything. They are all simply a TEMPEST IN A TEAPOT.
The ULTIMATE TRUTH. Take the Fed forecast with a grain of salt. It has a terrible track record https://www.cnbc.com/2023/09/20/tak...n-of-salt-it-has-a-terrible-track-record.html (BOLD is my opinion OR what I consider important content) "On Wednesday, the Federal Reserve will publish its latest economic forecasts. There will be an intense focus on the Summary of Economic Projections, which is the Fed’s own estimates for GDP growth, the unemployment rate, inflation and the appropriate policy interest rate. The summary will be released as an addendum to the statement following Wednesday’s Federal Open Market Committee meeting. Investors will carefully study these projections, and they will likely move the market. But should you change your investment portfolio based on the Fed’s projections? You probably should not. The Fed’s poor forecasting record: One example Larry Swedroe, head of financial and economic research at Buckingham Strategic Wealth, for decades has studied economic forecasts of everyone from stock-picking gurus to the Federal Reserve. He has this piece of advice: Don’t base your investment decisions on what the Fed says. Or anyone else, for that matter. Swedroe recently wrote an article where he looked at one simple metric: the Fed’s effort to project its interest rate increases for 2022. Swedroe noted that at the end of 2021, the Federal Reserve forecast that it would need to raise rates three times and that its policy target rate would end 2022 below 1%. What actually happened? The Federal Reserve raised the Fed funds rate seven times in 2022, ending the year with the target rate at 4.25%-4.50%. Federal Reserve: 2022 meetings (rate hike each meeting, in basis points) Dec. 14 — 50 bp Nov. 2 — 75 bp Sept. 21 — 75 bp July 27 — 75 bp June 16 — 75 bp May 5 — 50 bp March 17 — 25 bp What happened? How could the Fed have been so wrong? It simply mis-forecast the rate of inflation. “One of the surprises, at least to the Fed, was that inflation turned out to be much higher than its forecast,” Swedroe wrote. “Its December 2021 forecast for 2022 inflation was for the core CPI to be between 2.5% and 3.0%. Inflation turned out to be more than double that.” If the Fed can’t get it right, what hope do we have? This has implications for forecasting in general. Swedroe, along with many others, has long noted the poor track record of stock market forecasters. But the Federal Reserve is a special case: “One would assume that if anyone could accurately predict the path of short-term interest rates, it would be the Federal Reserve — not only are they professional economists with access to a tremendous amount of economic data, but they set the Fed funds rate.” Yet the Fed has a poor track record predicting not just interest rates, but other issues such as GDP growth. I discuss this in my book, “Shut Up and Keep Talking: Lessons on Life and Investing from the Floor of the New York Stock Exchange.” The Fed’s own research staff studied the Fed’s economic forecasts from 1997 to 2008 and found that the Fed’s predictions for economic activity one year out were no better than average benchmark predictions. How does this happen? There are two problems: 1) Predictions from the Fed and everyone else are riddled with bias and noise that limit the quality of those predictions; and 2) Lack of complete information, because events occur that are unpredictable and can affect outcomes. All of this should make everyone very humble about forecasting, and less eager to make sudden changes in investments. The key to investing is to know your risk tolerance, have a long-term plan, stay invested and avoid market timing. Swedroe’s conclusion: “If the Federal Reserve, which sets the Fed funds rate, can be so wrong in its forecast, it isn’t likely that professional forecasters will be accurate in theirs.”" MY COMMENT Investing has NOTHING to do with economic data or projections. Good investing is a product of fundamental analysis of individual businesses and the long term.
This is a HUGE issue in the investing world and for market and busines freedom. Look at the date of this little article.....it has gotten a lot worse since way back in 2016. The Big Three Asset Managers Dominate US Corporate Control https://medium.com/@UvACORPNET/the-...rs-dominate-us-corporate-control-ee8e209f222d (BOLD is my opinion OR what i consider important content) "Since 2008, a massive shift has occurred from active towards passive investment strategies. This burgeoning passive index fund industry is dominated by BlackRock, Vanguard, and State Street, which we call the ‘Big Three’. In a new working paper CORPNET shows that already in 40 percent of all listed U.S. corporations the Big Three together constitute the largest shareholder — and even in 88 percent of the S&P 500 firms. This re-concentration of ownership is unprecedented and unlike the earlier ascent of actively managed mutual funds, such as Fidelity, is likely here to stay. Listed companies where the Big Three are the largest shareholder (Green), second largest (Orange), third largest (dark blue), or are not among the top shareholders (cyan). The Big Three are depicted in magenta. Unlisted companies that own listed companies are represented in grey. In contrast to active funds, the Big Three hold illiquid and permanent ownership positions, which give them stronger incentives to actively influence corporations. An analysis of the voting records on shareholder meetings reveals that the Big Three indeed utilize coordinated voting strategies but generally vote with management, except at director (re-)elections. Private engagements with management represent an important channel through which the Big Three exert influence. Moreover, BlackRock, Vanguard, and State Street are arguably exerting ‘hidden power’ because company executives are likely to internalize their objectives. Finally, we find indications that this development entails new forms of financial risk, including anticompetitive effects and investor herding. Read the entire article here: http://ssrn.com/abstract=2798653" MY COMMENT Unless we want to continue to concentrate power over business in the hands of a few ELITE power mongers......we need to come up with some system to keep these voting rights in the hands of the actual individual investors. I have seen some regulatory proposals lately to start to do this.....but.....it is very unlikely much will really happen.
That's a pretty solid/concise summation by Swedroe and yourself actually. Forecasting this type of thing has so many unknown variables. Yet, the media and others make assumptions/guesses about it non-stop. If one strips away all of the BS and thinks about it....there are so many things that can change over a period of time. I will say and give a teeny bit of credit to FED JP with the press the other day. They were doing their best to nail down absolute parameters and dates and timeframes with him. He finally basically told them that these forecasts are just that....a forecast. They are subject to known and unknown changes and cautioned them about reading too much into further and distant projections. Investors, the FED, and anyone else probably have an idea, an opinion, maybe even a guess about some of this stuff. To say in October of 2024 or specific time we are going to be at "X" or at a particular point is impossible to know with certainty. We may have a "general" idea at best, but predicting any of it with certainty is very difficult....impossible. I think (hopefully) most long term investors do not obsess too much about the "fine print" about it. You can be aware of it and what goes along with it, but take it in very measured doses.
Now that I set up this post with the above....here is what I see as the current biggest threat to business and free markets. You may agree or disagree on a social or other level. Feel free to disagree with this little article if you are inclined. I post this for discussion NOT argument. Investment-House Collusion Suffocates Market Signals https://www.realclearmarkets.com/ar...llusion_suffocates_market_signals_981148.html (BOLD is my opinion OR what I consider important content) "Even occasional readers of these pages will be aware by now that American capitalism is suffering attack from giant investment-house magnates who would prefer to replace the invisible hand of free markets with the marshal’s baton of their own direction. Such replacement would destroy – and is destroying – the genius of the market and of capitalism generally, with disastrous effects for American and world commerce and the human lope toward the broad, sunlit uplands of ever-increasing happiness and prosperity. In order to see this, join me in a thought experiment, one whose correlation with reality you can for yourself judge. Imagine that American investment is dominated by three huge investment houses – operations that collect other people’s money to invest for them. Then imagine that these three investment houses are the two biggest investors in one another, respectively, such that they in practice function as a single, giant Borg. Also imagine that the Borg collectively is the biggest shareholder of most American corporations by a very, very long chalk. Now posit that the chief executives of these companies have used the power of the investments that they have placed for other people – power that really belongs to the ultimate investors and beneficiaries of those investments, not to them – to force all of the major public corporations of the United States to do those chief executives’ collective bidding, rather than to respond to market stimuli and feedback. Assume that we know this because the chief executive of one of the Borg components, BorgRegent, who fancies himself the fairest marshal of them all, has spent years bragging about it. Isn’t it clear that every intervention by the Borg will result in a subtraction from the knowledge that freely functioning markets generate? Such markets, for instance, have long since established, as common sense also establishes, that the best way to prosper as a company is to hire the people who will be best at the jobs for which they’re hired, and not on any other basis? In other words, the only competent hiring plan is one of hiring purely on the basis of merit. Everyone knows this, and in a freely functioning market without the Borg, those companies that hired on any other basis would rapidly see the consequences in falling productivity, revenue, profit and share price. The market and its signaling function – the primary value of free markets other than the, you know, freedom itself – will swiftly correct the misimpression that hiring on any other basis is a good idea. But now posit that the Borg gets involved and forces companies to hire on the basis of considerations that are irrelevant to success, such as skin color, sex and sexual orientation. Imagine that they require companies to pretend that research that proves no such thing demonstrates – contra markets – that hiring on these bases magically increases productivity and corporate value. And then posit that the Borg uses the power of other peoples’ money to force essentially all large companies to do this. The effect will be to destroy the signaling function of the market. If everyone is forced to do an unproductive thing, then the market won’t be able to indicate that it’s unproductive. But this won’t mean that it is productive; rather, it will mean that it is vastly unproductive, because the whole market is engaged in the unproductive thing – but that the Borg has made sure that the evidence of unproductivity is hidden. In fact, it would seem pretty clear that the whole purpose of the Borg forcing something so unproductive – and so malign – on all companies at the same time would exactly be to hide how unproductive it is. The Borg is specifically acting to break the information effect of the market. Similarly, imagine that the Borg has required these companies to abandon cheap, reliable energy to embrace expensive, unreliable energy – which, incidentally, is no cleaner than the reliable and affordable stuff. Energy is a central cost of any modern business. Any business that voluntarily gave up the good stuff to go for the expensive and spotty alternative would soon find itself out of business, as it should, and this information would inform other companies not to do the same thing. But here, again, the Borg’s forcing everyone to adopt the same terrible decision at the same time masks that market-information process. Again, that seems to be the specific purpose of the Borg: to defeat the market. Now, what shall we call a combination by three giant investment houses to use other people’s assets to force behaviors that reduce the productivity of all large American corporations in a way that masks the free-market information that these moves are wildly unproductive? It’s certain that this combination to force unproductivity while hiding that effect will make things more expensive for consumers and decrease their general welfare. If only I could remember the name for such things." MY COMMENT POWER corrupts and ultimate power corrupts to an ultimate degree. This sort of power over business is the ultimate threat to Free Market Capitalism and individual business freedom to do and run their business based on the actual factors that will lead to economic success for the business owners.....the shareholders.
NOW....back to my favorite MORONS....the FED. The Fed's 'plausible' economic outcome leaves little margin for investors https://finance.yahoo.com/news/the-...es-little-margin-for-investors-220022932.html (BOLD is my opinion OR what I consider important content) "Stocks plunged on Thursday and the S&P 500 (^GSPC) suffered its worst day since March. Meanwhile in bonds, the belly of the US Treasury yield curve surged to 15-year highs, highlighting increasing investor risk aversion following Wednesday's Federal Reserve decision. Fed Chair Jay Powell stuck to his guns Wednesday with the "higher for longer" mantra and left the Fed's main policy rate unchanged. But he threw tepid water — if not cold water — on expectations that the US economy will avoid recession this cycle. Responding to a reporter question, Powell said that a soft landing is not the Fed's baseline expectation; it's merely a "plausible outcome." At the long end of the US yield curve, bond vigilantes are running with the remarks — driving the 10-year near 4.5%, the highest level since 2007. At the short end of the curve, the Fed's policy rate remains restrictive. And ironically, the more inflation cools, the more restrictive the Fed's policy rate will become. That's because the so-called real policy rate is the Fed's overnight benchmark rate minus core inflation. If the Fed holds its nominal policy rate where it currently is while inflation cools, simple math says that the real policy rate will increase. And that's increasingly what the Fed itself is signaling. As Yahoo Finance's Myles Udland noted Thursday in this column, Fed officials now see fewer rate cuts in 2024 and 2025 than they did at their June meeting. "Higher for longer" effectively means "restrictive for longer." In a private note to clients, Alfonso Peccatiello, founder & CEO of TheMacroCompass.com, says that Powell and the Fed are sitting "between a rock and a hard place," making it a "tricky situation" for most investors. Risk assets like stocks have "limited upside" yet bond investors aren't faring much better. For bonds to surge higher, yields would need to decline substantially, which would be mean a hard landing. Peccatiello ominously concludes that bonds can't rally substantially "unless something breaks for good." For the stock investors, the surge in yields is bad news for those who rode the megacap stock wave higher earlier in the year. The triple-digit gains of Nvidia (NVDA), Tesla (TSLA), and Meta (META) are fading, as Apple (AAPL) hovers near five-month lows. Those longer-duration stocks tend to suffer the most when bond yields suddenly move higher. Nasdaq 100 Heat Map - 2 Days Yet, investors have also lost confidence in cyclical stocks, as economic murkiness and headwinds abound. The industrial sector, for instance, has suffered the worst large-cap returns over the last month, down 3.5%. But all is not lost for investors willing to be nimble. Bonds may settle down after the latest repricing cycle ends, and seasonal factors will once again favor stocks in a few weeks. As ever, shorter-term traders may soon wade into the market's murky waters, but the Fed has all but cemented challenges ahead for buy-and-hold investors in this environment." MY COMMENT In spite of the continued IDIOCY....take heart.....soon the markets will move on from the FED. It is starting to happen now. This week is perhaps the last gasp for the FED. If they have another hike left....well....we should be done with them before year end. The power of long term investing is the only refuge for investors that do not want to simply give in to speculative gambling.
HERE are a great article on this topic of the FED. I highly recommend reading this one which is a little long to post. Dots: Stabs In the Dark Without Any Substance https://www.realclearmarkets.com/ar...in_the_dark_without_any_substance_981257.html
So far a good day today for the markets and general averages. Lets keep it that way till the close and shave a little bit off the losing result this week.
I strongly agree. Now is not the time to become scared’: Daniel Ives says AI-driven growth will lift tech stocks in the upcoming year — here are 2 names that he likes right now https://finance.yahoo.com/news/now-not-time-become-scared-124511425.html (BOLD is my opinion OR what I consider important content) "Overall, this year has seen a solid turnaround from last year’s losses. The S&P 500 and the NASDAQ are both showing year-to-date gains, of 16% and 27% respectively. That holds, even as the last few weeks have been disappointing; the S&P is down ~4% this month, and the NASDAQ is down 6%. One thing is clear: tech stocks powered the year’s gains, riding high on the surge of interest in artificial intelligence tech, AI, which burst into prominence with ChatGPT’s release last November. AI has transformed the markets, getting investors’ attention with its promise of greater adaptability, efficiency, and profitability, and some of the Street’s analysts are saying that the AI boom is no flash in the pan but a lasting change. Wedbush’s Daniel Ives, a 5-star analyst rated in the top 2% of the Street’s stock pros, epitomizes this view. He has long been a booster for tech stocks, and in a recent note he reassures investors that ‘now is not the time to become scared.’ Ives acknowledges the hodgepodge of pressures on the stock markets, describing the current environment as a ‘Rubik’s Cube backdrop,’ but goes on to say, “We focus on tech growth led by AI. It all comes down to growth in the tech space and what do true Street numbers ultimately look like into 2024, this remains the key focus in our opinion for investors…. It’s the rocket ship-like trajectory of AI driven growth that will hit the shores of the tech industry over the next 12-18 months that speaks to our unabated bullishness for tech stocks.” Ives’ recent stock recommendations show that he truly is all-in on AI. He’s taken strongly bullish stances on AI-driven tech stocks, believing that AI will drive growth forward." (if you want to see his two picks click on the link......I do not push individual stock picks......so I did not post that portion of the article) MY COMMENT All I can say is.....I agree completely.
Good news for MSFT and for shareholders.......finally. Microsoft one step closer to UK approval of Activision Blizzard deal https://finance.yahoo.com/news/micr...al-of-activision-blizzard-deal-115942118.html AND UK Regulator Gives Preliminary Approval of Modified Microsoft-Activision Deal https://www.investopedia.com/uk-reg...of-modified-microsoft-activision-deal-7973295 MY COMMENT This is the other HUGE drag on the Free Markets and business......and investing......regulation by governments and bureaucrats. Look at the ARM deal with NVDA as the perfect example. What a loss for NVDA shareholders to be deprived of all the business synergies that deal would have produced.
OK.....I will climb down from my soap box. Feel free to climb onto yours if you wish.....you will get no argument from me.
A very good day today in my account so far ....but....not a perfect day. I have a single stock in the red today....HON. AND.....a nice gain with three hours to go. No doubt it will be a DOWN week.....but a good day today could erase one of the big down days this week. Every positive day helps.....on the path to long term investing success.
At least I closed out the week with a moderate gain today. that gain was caused by only three stocks....NVDA, COST, and AAPL. Those three were good enough to get me a beat on the SP500 by 0.58% today. SO.....lets carry the gain today to next week.......and move on to year end.
HERE is how the big averages did this week.......poorly. DOW year to date +2.46% DOW for the week (-1.89%) SP500 year to date +12.52% SP500 for the week (-2.93%) NASDAQ 100 year to date +34.42% NASDAQ 100 for the week (-3.47%) NASDAQ year to date +26.23% NASDAQ for the week (-3.62%) RUSSELL year to date +0.87% RUSSELL for the week (-3.82%) SO.....a brutal FED week this week....for no particular reason....since nothing changed at all. As to my entire account I am now at year to date +28.55%. Last Friday I was at +33.13% year to date for my entire account. A drop of 4.58 in my year to date percentage gain. BUMMER......but....still a nice hefty gain.
This story is a HUGE cautionary tale. These NFT collectables are a JOKE. As a collector in numerous categories including art, antiques, and sculpture.....it was obvious to me when this was happening that this stuff was worthless. Much worse than all the "limited edition collectables" that I have seen sold over the years that are also worthless. PLEASE.....if you are considering anything like this....do your homework......dont believe the HYPE. Digital Disaster: 95% of NFTs Are Completely Worthless as Collectible Market Collapses https://www.breitbart.com/tech/2023...ly-worthless-as-collectible-market-collapses/ (BOLD is my opinion OR what I consider important content) "A comprehensive study has unveiled that the vast majority of Non-Fungible Tokens (NFTs), once the darlings of the digital asset world, have plummeted to zero value, leaving nearly 23 million people holding onto worthless digital collectibles. According to market data, 95 percent of all NFT collections now have a total market value of zero. Business Insider reports that the cryptocurrency community and the internet in general was once abuzz with the revolutionary concept of NFTs, unique digital assets representing ownership or proof of authenticity of a specific digital item or piece of content, typically tied to a blockchain. These digital collectibles experienced a meteoric rise in 2021 and 2022, with the market witnessing a colossal bull run, leading to a staggering $2.8 billion in monthly trading volumes. High-profile collections like Bored Apes and CryptoPunks were the darling of investors, fetching millions of dollars and drawing celebrities like Stephen Curry and Snoop Dogg into the fray. However, the once-thriving NFT market is now a shadow of its former self, with a study by dappGambl revealing a sobering reality. The study of over 73,000 NFT collections uncovered that a whopping 95 percent of them now possess a market cap of zero ether, the cryptocurrency typically used to buy and sell NFTs. This alarming scenario implies that a vast majority of NFTs have crashed to a value of zero, rendering them essentially worthless and impacting almost 23 million holders of these digital assets. The researchers noted, “This daunting reality should serve as a sobering check on the euphoria that has often surrounded the NFT space.” The study underscores the pitfalls and potential losses overshadowed by stories of overnight success and digital art pieces selling for millions. The current state of the market is characterized by speculative and hopeful pricing strategies, far removed from the actual trading history of these assets. The study further divulges that 79 percent of all NFT collections currently remain unsold, creating a surplus of supply over demand and a buyer’s market that has done little to rekindle enthusiasm. Even after filtering out lower-value, less significant projects, the majority of collections hold minimal value today. Out of the top 8,850 collections by market cap, 18 percent are worthless, and 41 percent are priced between $5-$100. Fewer than one percent have a price tag above $6,000, a stark contrast to the regular million-dollar deals witnessed two years ago. Breitbart News previously reported that investors who purchased NFTs from the high profile Bored Apes collection sued Sotheby’s Auction House for its role in selling the collectibles that quickly lost their value: The lawsuit further claims that the boost to Bored Ape NFT prices provided by the auction “was rooted in deception.” It alleges that it wasn’t revealed at the time of the auction that the buyer was the now-disgraced crypto platform FTX. “Sotheby’s representations that the undisclosed buyer was a ‘traditional’ collector had misleadingly created the impression that the market for BAYC NFTs had crossed over to a mainstream audience,” the lawsuit stated. The plaintiffs argue that harmed investors bought the NFTs “with a reasonable expectation of profit from owning them.” In September 2021, Sotheby’s sold a lot of 101 Bored Ape NFTs for $24.4 million at its “Ape In!” auction, well above the pre-auction estimates of $12 million to $18 million. That’s an average price of over $241,000. However, Bored Ape NFTs now sell for a floor price of about $50,000 worth of ether cryptocurrency, according to CoinGecko data." MY COMMENT How pathetic these sellers are for taking advantage of the buyers of this "stuff". BUYER BEWARE.....as usual.
DUH....you think? Stock market reaction to Fed is overdone, Wall Street bull says https://finance.yahoo.com/news/stoc...overdone-wall-street-bull-says-182730486.html (BOLD is my opinion OR what I consider important content) "Stocks were crushed following Wednesday's message from the Federal Reserve that interest rates will remain higher for longer than investors initially thought. The S&P 500 fell more than 2% in a two-day span and the yield on the benchmark 10-year Treasury hit its highest level in 15 years. In total for the week, data from Bank of America showed investors dumped equities at their highest pace since December 2022. But that reaction might be overdone according to Fundstrat's head of research Tom Lee. "The market had an overly hawkish reaction to the FOMC meeting," Lee said in a video for clients after the market close on Thursday. Lee disagrees with one of the main factors driving the market action. The Federal Reserve's updated Summary of Economic Projections (SEP) released Wednesday showed a bias toward one more interest rate hike this year and revealed the Fed now sees interest rates remaining higher than the central bank initially thought in both 2024 and 2025. Lee doesn't see this as a major issue, though, and said higher ratesfor a more sustained period in the Fed's forecast makes sense given the Fed's boost to its outlook for Gross Domestic Product (GDP). Fed Chair Jerome Powell noted during his press conference that economic growth — which the Fed now sees hitting 2.1% this year, up from its 1% increase in June — would be the driver for another rate hike, not inflation. "We've seen inflation be more persistent over the course of the past year, but I wouldn't say that's something that's appeared in the recent data," Powell said. "It's more about stronger economic activity, I would say. So if I had to attribute one thing, again, we're picking medians here and trying to attribute one explanation, but I think broadly stronger economic activity means we have to do more with rates." To Lee, the marriage of higher interest rates and higher GDP not only makes sense, but could mean higher price-to-earnings ratios as the economy expands. Higher P/E ratios would then likely lead to higher stock valuations. "A hawkish take would be inflation persistence went up and therefore Fed funds needs to stay high," Lee wrote in a Friday note to clients. But, as Lee notes, the Fed's projections don't foresee an increase in inflation. Lee also highlights that the projections themselves are just those — projections — and are often subject to change by the Fed. For instance, just three months ago the Fed saw 0.5 percentage points more worth of rate cuts in both 2024 and 2025 than it did in its most recent forecast released Wednesday. Despite the market reaction, Powell himself sent a similar warning about the SEP throughout his press conference. "The SEP is not a plan that is negotiated or discussed, really, as a plan," Powell said. "It's accumulation, really, and what you see are the medians ... So I wouldn't want to bestow upon it the idea that it's really a plan. But what it reflects, though, is that economic activity has been stronger than we expected, stronger than I think everyone expected." Higher rates on Treasury yields don't overly concern Lee either. On Friday, the yield on the 10-year Treasury notes hovered around 4.4%. Lee pointed out that on average when the yield on the 10-year Treasury notes falls between 3.5% and 5.5% the average price-to-earnings ratio on the S&P 500 is about 20. A price-to-earnings ratio of about 20 would be in line with the P/E from 2019, per Lee, and could move higher from there. "I don’t think this rise in yields is a thesis killer," Lee said in the video. "Obviously it’s a headwind for stocks. I’d like to see yields come down but again I think the sell-off in the last couple of days is an overreaction." Lee's final point in his most recent note centers around seasonality. September is a well-known bad month for stocks. But Lee says exiting that "seasonal weakness" could be a tailwind for stocks. Carson Group's chief market strategist, Ryan Detrick, agrees with Lee. The last three times whenthe S&P 500 fell by more than 1% in both August and September, the benchmark index rose at least 8% in October. "As bad as things feel," Detrick wrote on X, "don't lose faith just yet."" MY COMMENT Anyone dumping stocks right now is simply giving in the short term market FEAR. We are not anywhere near even a simple correction in the general markets. The IDIOCY of the short term......is a killer for anyone hoping to make average market returns. Of course we have known for a long time....that the average investor.....can not match or beat the unmanaged indexes. The current market drop and semi-panic is a classic example of why this is true.
