October has a spooky reputation.
But October’s frightful reputation appears to be confined to isolated events.
The title is a comment that came from Fed Chief Jerome Powell. He made the remark at last week’s quarterly press conference, which followed the Fed’s decision to hike the fed funds rate by 0.25% to 2.00-2.25%. It’s the eighth quarter-point rate hike since the Fed began boosting the key rate in late 2015.
The Federal Reserve’s two-day meeting concludes on Wednesday. It’s widely expected central bankers will hike the fed funds rate 0.25 percentage points to 2.00-2.25%.
Most investors anticipate a December rate hike, or four this year.
At 2.00-2.25%, rates would remain near historically low levels.
As rates rise, the fed funds rate is approaching what’s called the “neutral rate.”
The S&P 500 Index has hit several new highs over the last month. The Dow Jones Industrial Average, which has lagged, finally recaptured its January 26th peak on Thursday (MarketWatch data).
It gets back to the strong economic fundamentals – profit growth, economic growth, and low interest rates. These are powerful underlying supports for the market. It doesn’t guarantee higher stock prices next month or next quarter, but the fundamentals did cushion the downside earlier in the year.
When ongoing concerns (trade frictions) failed to dent the economic outlook, investors simply became accustomed to these concerns. They haven’t receded, but they get incorporated into the outlook. When new risks failed to materialize, investors refocused on the fundamentals.
A key factor that is aiding corporate profits is solid economic growth. An expanding economy equals expanding sales throughout the economy. Not surprisingly, businesses need new employees. And the help wanted sign is hanging in the window.