Thursday, October 27, 2016

Stock Market Could Launch After Elections

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*Investors likely are waiting for the elections to pass before increasing exposure.
*Companies are showing us that valuations are cheap.
*The Fed may be telling us that there is less risk by raising Fed Funds rates.
*When that one major risk passes — the elections — markets can launch.

Many investors are probably tired of the grinding sideways action of the stock market (SPYQQQ). The biggest risk on the horizon is the elections. Building up to that though are some positive signs. Markets could go up, no matter who wins, given the build-up.
Positive Hints Building
  • The Fed confirms a strong economy by raising
  • Company merger activity jumped
  • Not much change in the global liquidity story
For The Fed To Raise, It Means They Are Not Worried About A Recession
On August 26th Fed Chair Janet Yellen said there is limited room to save the country from a recession:
Finally, the simulation analysis certainly overstates the FOMC's currentability to respond to a recession, given that there is little scope to cut the federal funds rate at the moment.
Those italics were Fed Chair Yellen's, to impress upon us that traditional tools are not available to save us from a recession.
For the Fed to raise rates means they are exponentially less worried about a recession, because causing one would be catastrophic. They don't want to take the chance.
Fed Chair Yellen said on September 21st:
We could cause a recession in the process. And so that's something my colleagues and I certainly wouldn't want to be responsible for.
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