Stock market’s ability to continue to climb higher

Asa Karlsson
October 11, 2021
Articles

The stock market has been on a wild ride this week with headlines about the debt ceiling, slowing economic growth and rising inflation had investors on edge this week.

The financial media has been fixated on the negative news this week. There was plenty to keep Wall Street distracted, including a stronger dollar and weak economic growth in China. The ongoing problems with oil prices also helped cause turbulence for investors everywhere.

October is historically volatile month as we’ve seen two major sell offs so far this year alone– and it isn’t over yet…

With the financial media focusing heavily on negative news, Wall Street was kept busy trying not fall victim to panic and sell off again in October! The two biggest crashes in market history occurred this month. The stock market has seen some choppiness, with investors on edge as October begins.

The 1987 crash was less severe than the one that followed it just 7 years later; but what happened then may happen again today – 1983-1987 were 8 difficult months for stocks (and bonds). It’s no secret why many people are abit anxious these days: not only do you get volatility when there is uncertainty about economic growth or whether interest rates will rise again soon after having fallen recently…but all fear needs to be taken seriously because someday fear can become reality!

The Atlanta Fed now has a new projection for the U.S., and it’s not as rosy: third-quarter growth will be at just 1%. The reason? Inflationary forces continue to rumble around globe; one such example being an increase in price levels seen with Personal Consumption Expenditures (PCE) index numbers recently released by economists from Federal Reserve Bank of St Louis which showed they rose 0.3% last month alone! This is much higher than any other time since 1984 when we’ve seen figures above 3%. And even more worrying – core PCE also climbed up over that same span, reaching its highest level.

But on the positive side, the third quarter of the year is shaping up to be positive, with FactSet projecting earnings growth at 27.6% and revenue growth an even 14%. Fourth-quarter estimates show that there will still only be a margin for improvement as economic expansion slows down; however, we can expect these numbers compared against last year’s 91% average rate in percentage points higher than expected!

It’s no secret that the US economy has been doing quite well over recent years. This week, we saw some encouraging news when ADP reported 568 thousand private sector jobs added in September – again crushing expectations for 425K and making it clear how strong our labor market really is! That number was backed up by another drop of jobless claims to 326 thousands while Labor Department revealed there were 194k additions last month which led them to remove their estimate on unemployment rate going below 4%.

The U-S continues its long string impressive recoveries from recession with stronger employment rates across all sectors especially if you look at goods producing ones like manufacturing where numbers are continuing to grow.

So, as we head into the fourth quarter, Avestix keeps its eyes wide open, and ears perked up for any news that might be coming out of now-Nasdaq’s and S&P500 top growth stocks (and there isn’t much).

We will conclude with Warren Buffet quote – “Be Fearful when others are Greedy and Greedy when others are Fearful”