The S&P halted its longest weekly win streak of the year, the Dow Jones slumped for the week, while the Nasdaq got a boost from Tesla. The S&P and Dow were dragged down by disappointing quarterly performances from industrial giants such as GE, 3M, Honeywell, Boeing, and a slide in McDonalds. The earnings season shifts into top gear next week, with investors receiving financial figures from five of the Magnificent 7 firms. For the week, the S&P slipped 1.0%, and the Dow slid 2.7%, while the Nasdaq gained 0.2%.
Despite dropping inflation numbers and a stronger economy, there appears to be a disconnect between what inflation data shows and what millions of Americans say they are experiencing. It’s partly due to the emotional scars from years of high prices, the high sensitivity to even residual inflation and massive credit card debt. But there may be something else at work: the government’s key inflation measure excludes some major everyday costs that have surged in recent years – Property taxes? Not counted. Tips? Not counted. Interest charges on your loans? Not counted.
Treasury yields seem to suggest that the inflation rate could rise again. What will that mean to the stock market?
Future Wealth’s View
With the uncertainty over the upcoming election coupled with potential risk that inflation effects are still being felt by the consumers, the stock market is most certainly priced for perfection. This oft used term in Wall Street means that everything has to be right for the stock market to go higher. If any one of the metrics – be it economic data or any of the Mag 7 company’s results or the elections goes awry, we will have a massive sell off.
That being said, we do not believe that this is time to exit the stock market. Instead, we believe that it is a time for patience – to take a pause and observe the direction of the market and wait for the moment when the uncertainty settles back down before making big decisions on one’s portfolio positions. The next two weeks are going to be a test of investor patience.
As the saying goes “Patience is not the ability to wait, but to keep a good attitude while waiting”.