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Posts published in October 2023

Proceeding through a Divided Market and Intense Volatility.:  Insights for a Scary Market on Halloween

There are always a new crisis in the stock market on a daily basis, but it focusing on the long-term has been rewarding.

Today’s stock market outlook for October 31, 2023, presents a divided sentiment. While some analysts remain upbeat, pointing to the stabilization of government bond yields and enthusiasm surrounding corporate earnings, others adopt a more guarded stance. There are concerns that escalating rates might further strain equity valuations. Anticipate volatility today, but the FED announcement and comments tomorrow could tilt the scales in favor of growth.

Stock futures have risen this Tuesday, as Wall Street endeavors to extend the momentum from yesterday’s session. Nevertheless, the quarter will conclude with its third consecutive negative month. Despite the recent market turbulence, we’ve seen several stabilizing influences:

  • The conclusion of labor strikes.
  • A resolution in the house speaker position.
  • The US continues to strengthen its reputation as a global safe haven, evidenced by significant investments in the US Debt market.
  • Third-quarter figures are surpassing expectations.
  • Inflation rates declining from the 2021 peaks. While the impact of interest rates on the economy is palpable, consumer confidence, albeit declining, remains robust.
  • Despite murmurs of a looming recession, concrete data hasn’t confirmed this speculation, though these concerns have persisted since the year’s onset.

In corporate news, Caterpillar reported third-quarter earnings that surpassed projections. However, they anticipate only a marginal rise in fourth-quarter revenue compared to the previous year, which has cast a shadow of doubt amongst investors. As a result, shares plummeted by over 4% in premarket trading. Contrastingly, the S&P 500 and the Dow experienced commendable surges on Monday, the former marking its best performance since late August and the latter since early June. Despite this positive shift, there are underlying concerns about the delayed repercussions of rate hikes. Nonetheless, the consistent outperformance of corporate earnings and the potential return of buybacks provide a silver lining.

Wall Street’s attention is awaiting the impending Federal Reserve decision concerning interest rates. Current predictions indicate a high likelihood of rates remaining unchanged. Given the yield curve’s ascent, the market anticipates that the FED will pause its tightening cycle. Projections also hint at the possibility of the FED easing its stance by 2024 to alleviate economic strains. While consumers grapple with these pressures, salary increments, and a buoyant job market offer a glimmer of hope.

Investors are also keenly awaiting October’s payrolls report, scheduled for release on Friday, in hopes of discerning any deceleration in the labor market.

In times of heightened pessimism, bull markets often emerge. Despite prevalent negativity in the media, there are many indicators of budding economic growth. Investors would be wise to maintain a value-centric investment strategy, balancing optimism with a keen sense of risk. Although the market’s uncertainty is ever-present, historical trends suggest that bull markets can thrive even with interest rates hovering around 5% or more. The resilience of the US economic machinery, which currently seems robust, will dictate the trajectory.  Long-term investing and practical risk management are paramount in these times but in all times of investing.

Key Points

  • The market outlook is still volatile, but with the market is showing signs of more bullish sentiment.
  • Bullish analysts point to the stabilization of government bond yields and enthusiasm surrounding corporate earnings. Economic indicators and earnings growth have been better than expected.
  • Cautious analysts are concerned about the potential for rising rates to strain equity valuations.
  • The market is expected to be volatile today, especially with the market looking toward the FED’s actions tomorrow.