10/27/2015 – A negative day with the Dow Jones down 41 points (-0.21%) and the Nasdaq down 5 points (-0.09%)
While I don’t necessary share the same view, most investors believe the rally off of the recent lows has been cause by a more “dovish” FED stance. Perhaps.
Yet, that notion does not address the primary issues. The recent slow down in earnings and numerous economic indicators. For instance, forward earnings guidance is down 2% on the S&P. The highest percentage drop since 2008.
“That is going to have an effect on all aggregate earnings for the S&P 500,” warns Morganlander. “It means that you’re going to see subpar market returns as S&P [500] earning struggle to get even higher highs. Net margins, we believe, will continue to revert back to its mean, which will have a downward pressure effect on actual profitability.”
I would go even further and suggest that margin and earnings will collapse as soon as our financial market readjust lower. It was an upward driven speculative spiral up and it will work in exactly the same fashion on the way down. With the QE, zero interest rates and stock buybacks now having minimal impact, things should accelerate down.
Which brings us to the FED.
“Hence risk assets have rallied for three weeks prompted by the turn to weaker U.S. data that began with the weak September jobs report, as the Fed’s rate decision is understood to be completely data dependent,” he said. “However, clearly for the market rally to be sustained it would be helpful if (the) FOMC statement tilted dovish by acknowledging this turn to weaker U.S. data.”
I have been saying this for a few months, but I guess I will have to say it again, The FED Will Not Raise Interest Rates Simply put, they cannot.
And that is the primary point most investors today miss.
- The overall stock market is selling at a 3rd highest valuation level in history.
- Earnings and the US Economy are on the way down. Despite zero interest rates.
- The FED is now powerless. They cannot raise interest rates nor can they stimulate the economy further. Negative rates will have minimal impact, if any at all.
But, if you believe the setup above translates into a “good time” to be fully invested in stocks or to be bullish, well, who am I to stop you.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. October 27th, 2015 InvestWithAlex.com
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