The Long Term Investor

I like it.

Stock market bulls are regaining control, and only inflation stands in their way

https://finance.yahoo.com/news/stoc...-inflation-stands-in-their-way-100051361.html

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

"The Dow Industrial Average (^DJI), Nasdaq Composite (^IXIC), and S&P 500 (^GSPC) extended their winning streaks to four days on Wednesday, leaving the major US stock indexes broadly positive after two disappointing months of losses.

At the end of July, the Nasdaq was sitting on gains nearing 40%, returns that few, if any, investors expected at the beginning of 2023.

But the months of August and September are well known by investors as seasonally weaker periods for the stock market. And this year proved no exception.

And with markets acting better and Wall Street looking for the potential end of a three-quarter earnings recession, the bulls are reasserting control.

The September Consumer Price Index (CPI) report out Thursday morning could easily put a fork in the fledgling stock market rally with an upside surprise in the headline number.

If Thursday's CPI report suggests the Fed has not been able to contain inflation, that could challenge the current bull market. As we discussed last week, the bond market is in the midst of a bear steepener that tends to end in tears — and a super-hot CPI print could be that catalyst.

JPMorgan is expecting the headline month-over-month CPI number to come in at the Street's consensus of 0.3% or below, which would be bullish for stocks.

The investment bank is still placing ~5% odds on a month-over-month number that comes in above 0.6%, and 27.5% odds we see inflation rise between 0.4% and 0.6% from the prior month.

In either of those two cases, JPMorgan expects stocks to tumble as investors brace for more forceful action from the Fed.

But away from any unexpected headlines or shifts in the economy, seasonal trends are now shifting from bearish to bullish into year-end, providing a powerful tailwind for stocks.

As we pointed out at the beginning of August, the CBOE Volatility Index (^VIX) has entered a seasonally bullish period that history suggests will last into mid-October. All else equal, a rising VIX is bad for stocks.

Now, historically, the VIX tends to peak twice in October, then trend downwards into the end of the year. That first peak is officially in the rearview mirror as of today.

And although the market's rally to start the year came as a surprise to many, data we explored back in July painted a rosy picture for investors. As we noted back in the summer, only the Black Monday crash of 1987 stopped the S&P 500 from rising over the year's final five months after a 10% gain through July.

Barring a similarly dramatic turn for this market, October's trading action suggests history might remain on the side of the bulls once again."

MY COMMENT

I expect that the probability is for a year end rally this year. We certainly did not get one last year. So....we are "owed" one.

 

Well if today is an indication of how much time I will have free over the coming days......I will not be posting tomorrow or Monday.

You guys work on the markets for Friday and Monday for me.

 

Time for one quick post. I can not access my account right now....so I am not sure how I ended the week.

DOW year to date +1.58%
DOW for the week +0.79%

SP500 year to date +12.72%
SP500 for the week +0.45%

NASDAQ 100 year to date +37.17%
NASDAQ 100 for the week +0.15%

NASDAQ year to date +28.10%
NASDAQ for the week (-0.18%)

RUSSELL year to date (-2.36%)
RUSSELL for the week (-1.48%)

Actually a good week overshadowed by the last couple of days. The DOW, SP500, and NASDAQ 100, were all positive for the week. I suspect that I was positive for the week.....since both the SP500 and NASDAQ 100 were....but can not look at my account right now.

 

We move into the guts of earnings over the next few weeks.

HAVE A GREAT WEEKEND EVERYONE.

 

Sounds good to me.

Bulls Pile Back In

https://www.bespokepremium.com/interactive/posts/think-big-blog/bulls-pile-back-in

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

"The S&P 500 has been in rebound mode over the past week, having now rallied 3.45% off the October 3rd low. In turn, sentiment has taken a distinguished bullish turn to start out the month of October. That compares to last month when sentiment took a more bearish tone as we discussed in Tuesday's Closer. On top of a 2.2 percentage point increase in bullish sentiment last week, this week saw the percentage of respondents to the AAII survey climb another 9.9 percentage points. That brings bulls up to 40%, the highest since the first week of September, and back above the historical average (37.5%).




Bearish sentiment saw a corresponding pivot lower. Bears are now down to 36.5% versus the recent high of 41.6% last week. While that is only the lowest level since the week of September 21st, it was the largest week-over-week drop since June 8th. Additionally, that decline has not been enough to bring bearish sentiment back to normal levels as it is still 5.43 percentage points above the historical average.




That has resulted in the bull-bear spread tipping back into positive territory for the first time in a month.



Of course, the drop in bearish sentiment was not nearly as large as the increase in bullish sentiment. That was because there was a notable decline in neutral sentiment. That share of respondents reporting that they expect unchanged prices fell by 4.8 percentage points this week. Not only was that the fourth week-over-week decline in a row, but it was also the biggest one-week decline since July. Now at 23.5%, neutral sentiment registered its smallest share in just under one year.


MY COMMENT

Sounds good to me.....but....I dont invest according to opinion polls.

 

Another......."I hope so".....little article.

Why stocks could be primed for a Santa Claus rally as resurgent earnings and falling rents push inflation down

https://finance.yahoo.com/news/why-stocks-could-primed-santa-004006237.html

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

"

• Investors could see stocks rally in the last stretch of the year, market veteran Ed Yardeni has forecasted.
  
• He says that's because the Fed is likely done with interest rate hikes, which have weighed heavily on equities.
  
• Investors are pricing in a 59% chance the Fed will cut rates by September of next year.
  

Stocks could be primed for a big year-end rally, thanks to the combined tailwinds of strong corporate earnings and falling inflation, according to market veteran Ed Yardeni.

That's partly because corporate earnings bottomed the past quarter, and are bound to surge higher into the end of the year, the Yardeni Research President said in an interview with CNBC on Thursday.

Wall Street is largely expecting firms to report improved profit margins over the past three-month period. Analysts are eyeing a 11.7% net profit margin for the S&P 500, above the prior quarter's 11.6% net profit margin, according to FactSet data.

"So I think we're going to get a very good earnings season, and I think that will help set us up for a year-end rally. Maybe a November-December Santa Claus rally," Yardeni said.

Previously, he forecasted the S&P 500 to rally to 4,600 by year-end, implying a 6% increase from the index's current levels.

That momentum will likely be coupled with a sharp drop in inflation, Yardeni predicted, shrugging off the latest Consumer Price Index report, where prices accelerated a hotter-than-expected 0.4% in September.

That increase is largely attributable to high rent prices, with shelter being the largest contributor to inflation last month, the Bureau of Labor Statistics said, with rent prices jumping 0.5% month-per-month and 7.4% year-per-year.

But real-time rental market data shows that rent growth is actually on the decline, Yardeni pointed. Asking rent prices climbed by just 0.2% month-per-month and 3.2% year-per-month, according to more recent Zillow data.

Those declines may not show up in the official CPI for 18 months, economists say, thanks to the lag in how housing prices are recorded. And that spells good news on the inflation front, as well as the outlook for interest rate hikes: When considering more timely rent data, inflation is likely hovering less than a percentage point above the Fed's 2% target, Yardeni said, which can give central bankers room to dial back rates in the economy.

Rates are now hovering at their highest level since 2001 as the Fed remains hawkish on inflation. That's weighed heavily on asset prices over the past year, with stocks sliding 20% in 2022.

"I think the Federal Reserve is done raising interest rates even though the inflation rate was somewhat hotter," Yardeni said. "I think the Fed has to look at the overall number, and the overall number suggests to me that inflation's turned out to be actually transitory instead of persistent, and I don't even think it's very sticky," he later added.

Markets are largely expecting the Fed to dial back interest rates in the second half of 2024, which could be a bullish catalyst for stocks. Investors are pricing in a 59% chance that rates could be lower than the current level by September of next year, according to the CME FedWatch tool."

MY COMMENT

We are due for a nice SANTA RALLY this year.

BUT....I will take what the markets give me.....for better or worse.

I rarely see this said much anymore.....but people still realize that the stock markets are NOT for short term money....right? I would hope so. AND......I am defining short term money as money that will be needed some time over the next 3-5 years.

This is a key tenet of long term investing. Being able to weather the erratic market movements by having a true long term focus and not having to sweat out the short term volatility. There is nothing worse than watching your money disappear when you are going to need it in a year or two or three for some obligation. A key component of RISK TOLERANCE is NOT putting pressure on yourself by investing short term money in stocks and funds.

 

Ok....that is it for now....I will be back to normal posting on Tuesday.

 

HERE is the week to come....before....it becomes the week that was.

Tesla, Netflix, and banks highlight earnings rush

https://finance.yahoo.com/news/tesl...t-earnings-rush-the-week-ahead-140003751.html

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

"After weeks of Fed speak and rising yields driving stock action, corporate earnings will take center stage in the week ahead.

Results from Bank of America (BAC) and Goldman Sachs (GS) will provide a look at how the financial sector is responding to the rising rate environment. Meanwhile, Tesla and Netflix will highlight the start of tech earnings.

A September retail sales report is expected to show minor growth amid an otherwise quiet week for economic data.

Recent economic data showed inflation cooling enough for the market to bet that the Fed won'traise interest rates at its November meeting but stocks still struggled to find solid footing as rising geopolitical risks and the fallout from higher for longer interest rates continue to cloud the picture.

In the past week, the Nasdaq (^IXIC) fell nearly 0.2% while the benchmark S&P 500 (^GSPC) rose almost 0.5% and the Dow Jones Industrial Average (^DJI) popped about 0.8%.

Inflation data out last week showed cooling price increases under the surface. The data left markets optimistic on a rate pause in November as Fed officials expressed that higher yields could provide necessary monetary tightening and effectively take the place of another interest rate hike.

But combined with a hot September jobs report, there isn't a broad consensus that the Fed is done hiking altogether.

"Continued strength in the labor market could lead to persistence in wage growth and forestall declines in consumption growth, which would leave price pressures elevated and growth above trend," Oxford Economics' team of economists wrote in a research note on Thursday. "With the Fed committed to returning inflation back to its long-run target of 2%, this would raise the odds of rate increases this year, extend the duration of restrictive monetary policy, and increase the chances of a recession occurring down the road."

The impact of the Federal Reserve's interest rate hikes on corporate America are expected to once again be a key focus during third quarters earnings season. And at first reading, major financial institutions are holding up, as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) all reported higher profits during earnings releases on Friday.

But JPMorgan CEO Jamie Dimon laid out risks ahead in the company's earnings release.

"US consumers and businesses generally remain healthy, although consumers are spending down their excess cash buffers," Dimon said before commenting on how rising geopolitical tensions in the Middle East could further cloud the economic picture.

"The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships," Dimon continued. "This may be the most dangerous time the world has seen in decades."

In the week ahead, Bank of America, Goldman Sachs, and Morgan Stanley (MS) will lead the earnings calendar for the financials sector.

"The disappointing thing is JPMorgan was the best last quarter and probably will be the best in terms of performance this quarter," Dave Ellison, Hennessy Financial Funds manager, told Yahoo Finance live after JPMorgan reported results. "So we're getting the best of bank earnings today and the rest is going to be not quite as exciting."

Tesla recently missed Wall Street's estimates for third quarter deliveries, and margins remain a key concern for the electric vehicle maker. Margins have declined throughout 2023 as the company has used price cuts to ignite demand.

Morgan Stanley equity analyst Adam Jonas thinks margins likely fell to 17.5% from 18.2% in the period prior. After hosting a "bull/bear lunch" this week, Jonas said the read on Tesla's earnings "skews cautious."

"Many are wondering if Tesla can grow earnings at all in fiscal year '24," Jonas wrote in a research note on Oct. 11.

He added: "The performance of Tesla stock following the print will likely be driven by comments on the forward outlook and how that may move consensus (up/down/neutral) for [fiscal year] '24."

For Netflix, investors will be searching for details on recent developments at the company including rumors of a price hike, new details on the streamer's password sharing crackdown, and the success of the advertising tier.

"We believe pricing changes, slower than expected sub growth, anecdotal consumer checks, and viewership data indicate Netflix has slowed down, if not outright stopped, cracking down on password sharing," Jefferies equity analyst Andrew Uerkwitz wrote in a research note previewing earnings. "This is likely due to re-focusing on getting timing, content, and pricing structures in a better position to increase borrower retention. We adjust our revenue model lower on new subscriber growth."

In sum, Uerkwitz is "looking for earnings to provide some answers."

Broadly, the question facing investors this earnings season will be if company results can bring stocks out of the recent slump. Entering third quarter reports, the Street projected flat earnings compared to the same period a year prior.

Some strategists believe the stronger-than-expected data could drive better-than-feared earnings. If that's the case, the next catalyst for stocks could take hold.

"We expect a better-than-feared earnings season and the SPX trading toward the top end of our range (4200-4600)," Wells Fargo equity analyst Christopher Harvey wrote in a note to clients on Friday.

But the "upside will be hampered by interest rates," he added."

MY COMMENT

Looks good to me. Earnings....that is. They should be as good as last time.....in the 70-80% BEAT range. At least that is my seat of the pants thinking.

 

I personally like and own.....SP500 ETF......and Fidelity Contra Fund. Unfortunately I think Contra Fund is closed. It was for a while starting back in 2006. I dont know if it still is.

The SP500 would give you long term stable growth.

Good to see you posting.....Broteau.

 

A BOOMING market today...early. I suspect people had a chance to consider the inflation data from last week and realize that it was actually positive. As the article a few posts above mentions......it was positive for cooling if you looked under the surface.

Good job with the markets guys.

 

I think I have time for one more post. Speaking of inflation.

Moving on From Inflation?

https://www.fisherinvestments.com/en-us/insights/market-commentary/moving-on-from-inflation

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

"CPI’s hold on headlines seems to be waning.

September’s Consumer Price Index (CPI) inflation report hit the wires Thursday, and something extraordinary happened: Headlines called it boring. The inflation rate staying at 3.7% y/y, matching August’s reading? Yawn. Core inflation (which excludes food and energy) easing a smidge from 4.3% to 4.1%?[ii] Wake folks for something more interesting next time. Even the what does this mean for Fed policy? angles seemed half-hearted. Is the world finally moving on from last year’s inflation spike today, on the bull market’s first birthday? If so, the associated sentiment lift should help stocks.

Inflation’s improvement is hard for many to feel. As we discussed late last month, the inflation rate may be down, but prices aren’t. So it was always going to take some additional time before sour inflation sentiment from last year wore off. The psychological effects of inflation need extra time to clear.

Now it seems things are starting to sink in. Oddly, one news item frequently couched as a disappointment tied to the inflation report might help: The Social Security Cost of Living Adjustment (COLA) for next year will be just 3.2%, much lower than last year’s record-high 8.7%. On its face, this is a much smaller raise for beneficiaries. But it is smaller because the COLA is based on the average inflation rate of CPI-W (CPI for Urban Wage Earners and Clerical Workers) in July, August and September. So the COLA dropped -5.5 percentage points because the average inflation rate plunged over the last year. Not in a straight line, but when has anything pertaining to the economy (or markets) ever been wiggle-free?

Incidentally, this is why we suggest not getting hung up on the fact that CPI’s twin 3.7% y/y readings in August and September are up from 3.2% in July and the year-to-date low, June’s 3.0%.[iii] Blips in both directions are normal, usually due to the base effect (fluctuations a year ago affecting the year-over-year calculation) or one-off movement in volatile categories. The latter is the case now, with gas prices’ summertime spike, but with oil down significantly since then, prices at the pump should ease.

From here, we don’t think slowing inflation itself is some massively bullish factor for stocks. It is too well-known for it to have any remaining surprise power over forward-looking stocks. Markets are too efficient for that. But we do see potential for investor sentiment to lift as society moves further beyond last year and the angst drops. It is one less thing to weigh on investors’ moods, one less source of angst, one less cloud fogging over better-than-appreciated fundamentals and therefore one less thing weighing on the willingness to take risk.

That is how falling uncertainty works as a market tailwind. It gradually chips away at investors’ general risk aversion, making them increasingly more willing to bid stocks higher. Easing inflation jitters are one source, but we see others that are likely to contribute over the period ahead: GDP continuing to grow despite rate hikes and “higher for longer” interest rates; getting a House speaker and moving past November’s government shutdown deadline; oil supply standing firm through regional conflict in the Middle East (and prices are down since the weekend’s outbreak); the presidential contest narrowing to two nominees and an eventual winner. These are just four examples. There are probably others. None are inherently bullish, in the sense that none directly propel corporate earnings. But they present opportunities for investors to get some emotional relief.

This is a key thing we suggest taking forward as this bull market celebrates its first birthday today—a milestone we have seen no one take notice of, probably due to the late-summer pullback. Sentiment and therefore volatility cut both ways. They cut downward in August and September, but the stage is set for the good kind. Turning points are impossible to pinpoint in advance, but with fundamentals strong and poised to keep beating dim expectations, the rally should resume in time (if it hasn’t already)."

MY COMMENT

My view is that the RALLY in this bull market started back up 2-3 weeks ago.

I would also view this bull market as more than a year old. By my measure it started about the first of July 2022. From that point on the SP500 has been in a general up-trend.

But....no matter when it started.....the main thing is that it DID start and investors have been enjoying a good strong market ever since. I have every expectation that we will see more of the same over the next weeks as earnings unfold and the FED does nothing.

I also expect to see a nice rally into year end this year.

By the time we are done with this year.....most.....rational long term investors will have erased all the losses from last year. It is a good lesson in long term investing to see that even a year as horrible as last year can be erased and overturned in one year.

 

The market today.....so far.

Stocks rally to start the week, Dow up nearly 400 points

https://www.cnbc.com/2023/10/15/stock-futures-today-live-updates.html

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

"Stocks jumped Monday as traders awaited a deluge of corporate earnings reports and shrugged off a rise in Treasury yields.

The Dow Jones Industrial Average traded 391 points higher, or 1.2%. The S&P 500 and Nasdaq Composite
each climbed 1.2%.

Nike, Intel and Travelers led the Dow higher in Monday’s session with advances of more than 2% each. All 11 S&P 500 sectors traded higher in the session.

Earnings season heats up this week with 11% of the S&P 500 slated to report results. Some notable names on deck this week include Johnson & Johnson, Bank of America, Netflix and Tesla.

Those results follow a solid start to the reporting period. Brokerage Charles Schwab rallied more than 4% on Monday after surpassing Wall Street expectations for earnings per share in the third quarter. JPMorgan Chase, Wells Fargo and UnitedHealth rose Friday after posting their latest quarterly results.

Some on Wall Street are bracing for more volatility into year end as yields and oil prices rise, inflation remains sticky, and conflict ensues in the Middle East. But a focus on earnings and what the Federal Reserve will do with interest rates can give investors optimism in the short term, according to Barclays analyst Ajay Rajadhyaksha.

“We expect bonds/equities to range-trade near term,” Rajadhyaksha said in a note to clients Monday. “Bond volatility and Middle East tensions are a drag on risky assets, but should be offset by earnings and dovish Fedspeak.”

Over the weekend, Israel’s military continued urging residents to evacuate northern Gaza amid a widely anticipated ground invasion. Meanwhile, U.S. Senate Majority Leader Chuck Schumer, D-N.Y., said Sunday that the Senate would work to quickly push through a military aid package to assist Israel as it battles Hamas.

The 10-year U.S. Treasury yield rose nearly 7 basis points to 4.698% on Monday, while oil prices slipped as investors parsed the latest updates out of the war.

Stocks are coming off a mixed week. The S&P 500 advanced 0.5% for its second consecutive positive week, while the Dow Jones Industrial Average gained 0.8%. The Nasdaq Composite
lost about 0.2% for the week.

“Last week was clearly a shock reaction to the geopolitical surprise,” said Aoifinn Devitt, CIO of Moneta Group. “We’re normalizing the turmoil ... and factoring it in, and then we’re kind of getting back to fundamentals.”

Most stocks in Dow trade higher amid rally

A group of stocks rising more than 2% helped the Dow
in Monday’s session. Nike, Travelers, Intel and Salesforce all added more than 2%. The blue-chip average gained about 1.1%, or nearly 400 points, as a whole.

Of the 30 stocks in the index, just three traded down in the session. Walgreens slipped about 1%, while JPMorgan and Apple each shed about 0.2%."

MY COMMENT

We are seeing a broad based rally today. Earnings are starting out with real strength and I expect this will continue. the normal earnings boo birds are nowhere to be seen. They are not even spouting positive stuff to ride the wave and claim credit....they have simply vanished in shame.

Of course now that I no longer own NKE....they are making a good move up. The stock is up by over 6% over the past one month. But they are still strongly negative for....six months and YTD. They turn positive again at the one year mark

 

Ok......I am out of here. You people.....make me some money today.

I thought I was close to an all time high a few days ago but once I looked at the real figures I saw that I was still off by about 3-4%. Plenty of time left this year to hit a new high for me and I expect to do so.

A random single stock comment.....APPLE. The markets continue to disrespect this stock. Earnings will be a good time to reverse this trend.