The Long Term Investor

A very good open and first hour today in the markets. Reminds me of yesterday...perhaps even a bit stronger. We are erasing the losses in August down to the level of a great big NOTHING BURGER.

I notice that some of the headline writers are fear mongering the PCE data that came out today. But all in all the data came iin right where expected and is not a negative.

 

On the topic of the market and the PCE.

Stocks rise after PCE data signals cooling inflation

https://finance.yahoo.com/news/stoc...lation-stock-market-news-today-105251134.html

"Wall Street stocks opened higher on Thursday after fresh data hinted at the easing in inflation that the Federal Reserve is looking for.

The Dow Jones Industrial Average (^DJI) popped 0.5%, or almost 170 points, also buoyed by a jump in Salesforce shares (CRM) after the software giant's AI-fueled earnings beat. The S&P 500 (^GSPC) added 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) put on 0.3%.

Thursday's update to the Personal Consumption Expenditures (PCE) Index showed the Fed's preferred inflation measure edged higher in July, with both headline and "core" readings in line with expectations.

"Despite the apparent strength of real demand, inflationary pressures continued to ease," Oxford Economics' economist Paul Ashworth wrote in a note to clients.

Stocks are eyeing a fifth straight day of gains to close out a losing August, as investors take heart from signs of a soft landing for the US economy in this week's clutch of data. That is spurring bets the Fed could ease off on its interest rate hikes at its upcoming September meeting.

Meanwhile, US jobless claims fell to 228,000 last week, undershooting expectations for 235,000, according to official figures released Thursday. That sets the scene for Friday's August jobs report, seen as key to the Fed's decision making in its mission to temper price pressures.

• Fed's preferred inflation measure edges higher in July
• 
  The Federal Reserve's preferred inflation measure edged higher in July, reversing some of the prior month's sharp drop as the central bank works to bring inflation back to its 2% target.
  
  The Personal Consumption Expenditures (PCE) Index excluding the cost of food and energy, or so-called "core" PCE, rose 4.2% over the prior year in July, in-line with economist expectations and up from 4.1% in June, data released by the Commerce Department on Thursday showed.
  
  On a headline basis, which includes all categories, PCE inflation rose 3.3% year-over-year in July, up from 3% the month prior and in line with expectations.
  
  Personal consumption expenditures jumped at a robust pace in July, rising 0.8% versus 0.6% the month prior, driven in part by the success of the "Barbenheimer" theatrical double header, along with the Taylor Swift and Beyonce concert tours.
  
  "Despite the apparent strength of real demand, inflationary pressures continued to ease," wrote Paul Ashworth, an economist at Oxford Economics, in a note to clients on Thursday.
  
  Core PCE is the inflation measurement preferred by the Fed, as PCE — unlike the more widely-cited Consumer Price Index (CPI) — feeds directly into GDP.
  
  Speaking last week at the Jackson Hole Economic Symposium last week, Fed Chair Jerome Powell said that inflation still remains too high.

MY COMMENT

A good day and good conditions for a good day. Really NO negative news today. The markets need to just do their thing......which at the moment continues in the bull market direction. We are going to skate past August with little to no negative impact on the markets.

Now let the.........."September is the worst month of the year".....fear mongering begin.

 

I am sure this is helping some today.

Treasury yields ease ahead of big August jobs report on Friday

https://www.cnbc.com/2023/08/31/us-treasury-yields-investors-await-fresh-inflation-insights.html

(BOLD is my opinion OR what I consider important content)

"U.S. Treasury yields fell on Thursday as investors looked to the release of key jobs data which could provide insight into the state of the U.S. economy.

At 10:45 a.m. ET, the 10-year Treasury yield was trading 2 basis points lower at 4.098%, but the 2-year Treasury
yield — most sensitive to the Federal Reserve’s fed funds interest rate — ticked up less than 1 basis point to 4.89%.


Yields and prices move inversely to one another. One basis point equals 0.01%.

The personal consumption expenditures index, closely monitored by central bank policymakers, ticked up 0.2% month-over-month in July and 4.2% year-over-year, matching estimates from economists polled by Dow Jones. Personal spending, however, great at a faster pace, expanding by 0.8% versus economists’ forecast of 0.7%.

Fed Chairman Jerome Powell said last week at the central bank’s annual Jackson Hole symposium that inflation remains too high and indicated that interest rates may go higher still.

Investors had previously been hoping that the Fed’s latest interest rate increase in July marked the end of the rate-hiking cycle which began in March 2022 and aimed to cool the economy and fight inflation.

Economic data released on Wednesday showed the economy may be pulling back, with the second-quarter gross domestic product revised downward to a 2.1% annual growth rate.

ADP reported Wednesday that private employers added 177,000 jobs in August, well below the revised total of 371,000 added in July. Economists surveyed by Dow Jones were expecting 200,000 jobs added in August."

MY COMMENT

Looks like the little August bump up in the Ten Year Treasury is now over with. I suspect that we will soon see yields retreat back into the 3% range....now that all the Wall Street people are returning from vacation and traders can not drive......(manipulate?).....the markets.

 

OK....having just looked I am hanging in there today with a nice gain....but not as nice as this time yesterday. No complaints.

I have two stocks slightly down today.....HON and MSFT. the rest are Up with AMZN being up more than 2% and COST being up more than 1%. If the market strengthens a bit through the day there is good potential to pull my two down stocks to the positive.

 

Well the markets could not drag me down today....even though they tried. I ended the day in the GREEN. Plus a beat on the old SP500 by 0.56%.

I had five stocks UP today and three stocks DOWN today. the down were.....HD, MSFT, and HON.

First day of the new month tomorrow. We now move into the final four month period of the year. It will be nice to lock in the gains at the end of this year in the historical record.

 

Here is the close today and the end of the month.

S&P 500, Nasdaq post August losses, breaking 5-month winning streak

https://finance.yahoo.com/news/sp-5...reaking-5-month-winning-streak-175343049.html

(BOLD is my opinion OR what I consider important content)

"Wall Street wrapped the final trading day of the month on a mixed note, capping a challenging August that dragged all three major averages into the red.

The Dow Jones Industrial Average (^DJI) sank roughly 0.5%, or about 170 points, even as it was buoyed by a jump in Salesforce shares (CRM) after the software giant's AI-fueled earnings beat. The S&P 500 (^GSPC) lost 0.16%, while the tech-heavy Nasdaq Composite (^IXIC) added roughly 0.11%, notching its fifth-straight winning day.

The monthly performance all the major averages suffered. The S&P 500 had its worst month since February, while the Dow had its worst month since May. The Nasdaq hasn't performed this badly since November of last year.

After closing the month of August in the red, the S&P and the Nasdaq ended what had been a five-month win streak.

Thursday's update to the Personal Consumption Expenditures (PCE) Index showed the Fed's preferred inflation measure edged higher in July, with both headline and "core" readings in line with expectations.

"Despite the apparent strength of real demand, inflationary pressures continued to ease," Capital Economics economist Paul Ashworth wrote in a note to clients.

Investors took heart from signs of a soft landing for the US economy in this week's clutch of data. That is spurring bets the Fed could ease off on its interest rate hikes at its upcoming September meeting.

Meanwhile, US jobless claims fell to 228,000 last week, undershooting expectations for 235,000, according to official figures released Thursday. That sets the scene for Friday's August jobs report, seen as key to the Fed's decision making in its mission to temper price pressures.

• Stocks close on a mixed note to end August loser
• 
  Wall Street closed on a mixed note as investors anticipate the next batch of labor market data, which will provide the latest gauge on the impacts of the Fed's rate tightening campaign.
  
  The Dow Jones Industrial Average (^DJI) sank roughly 0.5%, or about 170 points. The S&P 500 (^GSPC) lost 0.16%, while the tech-heavy Nasdaq Composite (^IXIC) added 0.11%. All three indexes posted losses for the month. And the S&P 500 and the Nasdaq ended five consecutive months of gains.
  
  Meta (META) and Apple (AAPL) also posted losing months, ending what had been a nine-month and five-moth win streak, respectively.
  
  
• Goodbye to a bumpy, narrative-shifting August
• 
  Thursday caps the final trading day of a rough August.
  
  The major indexes are on track to lose more than they gained, despite a recent hot streak. And narratives about the state of the economy and the Fed's interest rate policy collided as fresh data and commentary amplified the sense of uncertainty.
  
  Leading up to the end of the month the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) both shed more than 1%. The Dow Jones Industrial Average (^DJI) had a tougher run, losing roughly 2.5%. The losing month for the major averages came despite a four-day win streak heading into the last trading day.
  
  The rough trading coincided with a vacillating mood on Wall Street.
  
  August began with an optimistic tenor as calls for a recession, which had been talked about for more than a year, began to recede. In its place was a more upbeat vision that the Fed might actually pull of its "soft landing." But more recent commentary from central bankers has clouded that hopefulness, bolstering a narrative that the Fed might have to keep rates higher for a longer period of time to tame inflation.
  
  And as summer gives way to fall, another emerging theme is the stronger-than-expected consumer, which may influence how the Fed approaches its inflation flight. With August nearly behind Wall Street, all eyes will turn to the Fed's September meeting where many of the clashing interpretations of these past few weeks will be put to the test."

MY COMMENT

the market losses for August were pared back to be almost irrelevant. They are certainly irrelevant over the longer term. the month end was not too bad considering where we were at other times in the month. We start September on a nice little week upswing.

 

BOOM......the markets explode into the open today.

I expect we will see some early day profit taking and trading against the market direction as we usually see these days. BUT....I like this open.

 

How true.

Why you’re hardwired to be pessimistic

https://www.riskhedge.com/outplacement/why-youre-hardwired-to-be-pessimistic1/rcm

(BOLD is my opinion OR what I consider important content)

"Fear is creeping in.

After a blazing-hot start to the year, in which the Nasdaq notched its best first half in 40 years...

And the S&P 500 rallied 20%...

Stocks just slammed into a brick wall.

The Nasdaq and S&P 500 are each down around 3% this month. And investors are on edge.

In fact, CNN’s popular Fear & Greed Index is “showing signs of fear for the first time since March.” Just last month, the index was showing “extreme greed.”

Why has everyone suddenly “flipped the switch” after a few bad weeks in the market?

I’ll let you in on a dirty little secret of investing: we’re hardwired to be pessimistic.

The skeptic who talks about what could go wrong sounds intelligent. He sounds smarter than the oblivious optimist. That’s why you see so many gloomy Wall Street analysts on CNBC.

Overcoming our negative bias is one of the biggest challenges we face as investors. If you can conquer this bias, you’ll unlock huge opportunities in the stock market.

Let me show you how this simple mindset shift could help you make millions of dollars in extra profits over your lifetime.

• The first person I heard talk about the stock market was one of my college professors.

I owe that guy a lot.

Maybe I wouldn’t have started investing without him. I used to think investing was an activity reserved for rich London stockbrokers.

Problem was… my mentor was a total pessimist. You know the type… always convinced the next stock market crash was right around the corner.

He owned a few stocks. But the majority of his money was in gold and silver. One day, he even brought in a 100 oz silver bar in a plastic bag to show me. His arguments for buying hard assets sounded convincing.

Governments printed trillions of dollars after the financial crisis. This “funny money” pumped up stocks, which could collapse any day. To protect yourself, you had to own assets that couldn’t be created out of thin air.

I fell hook, line, and sinker for this argument and threw all my money into “smart” investments like gold and silver. It felt like I was in on some secret only intelligent investors knew about. Buy stocks? That was for suckers who were going to lose all their money.

But the joke was on me. US stocks went on to have one of their best decades ever... while precious metals were one of the worst-performing assets over the same timeframe.

Luckily, I figured this out early: betting on the end of the world is a surefire way to go broke. I started investing the vast majority of my net worth in the stock market.

I learned to stop obsessing about what might go wrong and, instead, look at the facts. And the facts show markets reward optimistic investors.

Take a look at this chart of the S&P 500’s all-time performance.



US stocks have risen roughly three out of every four years since 1945. Folks who invested $30,000 in the S&P 500 in 2010 have over $100,000 today. And despite many crashes, the odds of making money in US stocks is 100% over any 20-year period in history.

Let me repeat: the odds of making money in US stocks is 100% over any 20-year period in history.

Unfortunately, many folks are still trapped in a pessimistic mindset today. It’s why most US investors expect stocks to crash, even when markets are surging to new highs.

• Why are we hardwired to be pessimistic?

It dates back to hunter-gatherer times. In those days, focusing on what might go wrong was a matter of life and death. For example, if you didn’t store enough food, you starved to death. If you didn’t guard your camp, a bear might eat you.

You must train yourself to tame this instinct in order to achieve investing success.

As legendary Fidelity money manager Peter Lynch once said, “More money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

In short, buying the best stocks in history required you to have a bullish mindset.

Imagine telling someone Netflix (NFLX) would disrupt the powerful cable industry 15 years ago. They would have called you crazy.

Yet today, Netflix has more subscribers than all the cable networks combined. And the stock has rocketed over 900% over the past 10 years.

Same for Amazon (AMZN). In 1999, former 60 Minutes host Bob Simon laughed out loud at the thought of “a couple of geeks who sketched out some software” destroying Sears Roebuck.

We know how that story played out. Amazon handed early investors 100,000%+ profits.

Don’t get me wrong, I’m not saying optimists always make money. Or that they always get in early on the next big thing. But being willing to take chances on potentially world-changing businesses is a virtue. You can make life-changing money by getting in early on just one incredible disruptor stock.

Pessimists have no chance of catching the best-performing stocks. They’ll come up with 10 reasons why it won’t work. They’ll talk themselves out of buying it.

But remember: the story of the US stock market over the past century isn’t one about pessimists. It’s about optimists and new record high after new record high."

MY COMMENT

So true. You have to be in the market to get the market gains. It is hard to be in the market if you are constantly worrying about everything going on daily.

This is why it is important to understand the basic academic research on the market......PROBABILITIES. Understanding and believing what is proven FACT will give you the mental toughness to take a stand against the lemmings when the markets are in a bad stretch.

 

Lately we see the same thing early in many market days. A good open that seems to fade in the first hour or two. Of course for me the first hour or two is mid-morning to lunch time on the East coast.

This is currently an OBVIOUS trading pattern. The HUGE AI trading operations are driving the markets down with their computer trading. It is the markets being LEGALLY manipulated. Than as the day progresses more retail oriented investors come in and support the markets.

 

I like the tone of this little article.

From Selloff to Surge: The Stage Is Set for September’s Market Rebound
Stocks are about to get a huge boost in September thanks to this morning’s inflation data

https://investorplace.com/hypergrow...e-stage-is-set-for-septembers-market-rebound/

(BOLD is my opinion OR what I consider important content)

• "The August selloff is not the end of 2023 stock market rally.
• August’s selloff was driven by reinflation fears and rising yields, both of which are now expected to reverse.
• Core inflation is likely to drop in August, leading to renewed disinflation hopes.
• Treasury yields, which spiked in August, should fall in September due to consistently soft economic and inflation data.
• The data suggests we’re on the cusp of a September surge due to elimination of reinflation fears and spiking yields.

So much for the August stock market selloff being the end of Wall Street’s monstrous 2023 stock market rally. While stocks did retreat about 5% throughout the first three weeks of August, they’ve come surging back in the final week, and now, the S&P 500 trades within striking distance of a new high. Prepare for a new stock market rally.

And stocks are about to get a huge boost in September thanks to this morning’s inflation data.

The July Personal Consumption Expenditures report was released this morning, and while it did show an increase in core inflation rates from 4.1% to 4.2% in July, the bump was exclusively due to “base effects” – or the fact that the comparable periods from a year ago had wildly different inflation rates, thereby impacting the year-over-year rates.

On a more accurate six-month rolling basis, the core inflation rate continued to drop in July to 3.4%. On a three-month rolling basis, core inflation dropped to just 2.9%. Both are very, very close to the Fed’s 2% target.



We believe this data tees up stocks for a massive September surge.

Prepare for the September Stock Market Rally

That’s because the drivers of the August stock market selloff were reinflation fears and spiking yields, and today’s data essentially eliminates those headwinds.

Clearly, any reinflation we’re seeing today is due to base effects and nothing more. Wipe away those base effects, and the core inflation trend remains lower inflation. Better yet, those base effects do become less pronounced next month, and as a result, the Cleveland Fed’s Nowcast model is calling for core inflation to drop again in August.

Shy of new geopolitical risks and a shift in market sentiment, reinflation fears should turn into renewed disinflation hopes over the next few weeks.

Meanwhile, Treasury yields – which spiked throughout August – have come crashing lower over the past week as the economic and inflation data has come in consistently soft. Most leading indicators suggest the data will remain pretty soft and that, by extension, yields will keep falling.

The spiking yields of August should turn into crashing yields in September.

While we cannot predict the future, our better judgment based on the short-term data suggests that, as reinflation fears turn into disinflation hopes and spiking yields turn into falling yields, the August selloff will turn into a September surge."

MY COMMENT

Sounds about right to me. I especially like this observation.

"The July Personal Consumption Expenditures report was released this morning, and while it did show an increase in core inflation rates from 4.1% to 4.2% in July, the bump was exclusively due to “base effects” – or the fact that the comparable periods from a year ago had wildly different inflation rates, thereby impacting the year-over-year rates.

On a more accurate six-month rolling basis, the core inflation rate continued to drop in July to 3.4%. On a three-month rolling basis, core inflation dropped to just 2.9%. Both are very, very close to the Fed’s 2% target."

Now that summer is over I think we will see the rise of the Ten Year Treasury end. I also expect that we will see the Ten Year come back into the 3% range.

 

Looks like the AI computer driven market dip is over for the moment. BUT.....they will be back later in the morning.....if their AI programs see an opening to drive the markets erratically.