Good morning, everyone. This is John Heil with Market Capital Management. Before we get started—happy birthday to my daughter, Megan. Our youngest just turned 32!
Market Overview
The stock market opened lower today, despite a weaker-than-expected jobs report that pushed interest rates down. The 10-year Treasury yield is at 4.07%, the lowest level in about three months.
You might ask: If the Fed is now almost certain to lower rates, why is the market down? There’s an old saying on Wall Street: “Buy on rumor, sell on fact.” Yesterday, markets rallied strongly. Today’s pullback—while modest—seems to be a reaction to yesterday’s move.
Why I See This as Positive
Overall, this is good news for investors. We’re near all-time highs, and I believe we’ll surpass them in the fourth quarter as we head into year-end.
Markets are now pricing in three Fed rate cuts this year, compared to just one that was hoped for a few months ago. If next week’s PPI and CPI inflation numbers (Wednesday and Thursday) come in tame, we could see markets move significantly higher.
The Bottom Line
Low inflation and low interest rates are historically one of the best environments for stocks. I think the setup looks very favorable going into year-end.
If you’d like to discuss what this means for your portfolio, give us a call at 760-310-1029 or email me at john@marketcapitalmanagement.com.
Wishing you a great weekend ahead!