The Independent Market Observer

Outlook for October and the Fourth Quarter

September 30, 2016

Yesterday, I laid out some of the big-picture constraints I see impacting the economy and the markets over the next year or two. Today, let’s take a look at what we can reasonably expect over the next month and for the rest of the year.

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Looking Ahead: 4 Big-Picture Themes

September 29, 2016

Writing my fourth-quarter preview of the economy and markets, which I plan to share with you tomorrow, I started thinking about several big ideas that are in play right now. Though these themes aren’t particularly actionable, they will frame our discussion of the near- to medium-term future.

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The Election and Market Worries

September 28, 2016

Should we, as investors, be worried about the presidential election?

After spending last week talking with financial advisors and their clients, and the past couple of days thinking about the debate, it seems that’s the question on pretty much everyone’s mind.

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What I Learned from the Presidential Debate

September 27, 2016

As expected, last night’s presidential debate was a slugfest. With both Trump and Clinton swinging freely at each other, and the moderator struggling to maintain control, it was interesting to see how the candidates chose to spend their time in front of the nation. We learned something, even if it wasn’t what we might have wanted to learn.

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Monday Update: Housing Steady, Fed Eyes December

September 26, 2016

Last week’s data focused on housing, including the National Association of Home Builders industry survey on Monday, housing starts on Tuesday, and sales of existing homes on Thursday. And of course, there was one very important event: the meeting of the Federal Open Market Committee.

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Presidential Debate Preview

September 23, 2016

After the Fed’s meeting, the next potentially market-moving event is the first debate between presidential candidates Hillary Clinton and Donald Trump. What can we expect from them on Monday?

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Fed Holds but Hints at December Hike

September 22, 2016

To no one’s surprise, the Fed decided not to raise rates yesterday. At the same time, however, it managed to hint about as strongly as it ever has that a rate increase is coming by the end of the year.

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Fundamentals Vs. Policy: It’s All About Growth

September 21, 2016

Yesterday we discussed the possibility of the Federal Reserve raising rates, and what that might mean for markets. Right now, markets are largely trading on what policymakers are doing—which is to say, interest rates—and as policy normalizes, so, too, should markets. In a normal market, shares will be priced off of earnings, rather than the latest comment from a Fed official.

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What Will the Fed Do?

September 20, 2016

Today is the start of the regular meeting of the Federal Reserve, which is tasked with managing the U.S. economy. The way it usually does this is by setting base interest rates, which the rest of the financial system keys off of. In recent years, the Fed has also used other methods—notably, buying bonds to reduce interest rates even further than the usual tools would allow.

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Monday Update: Economy Stays in Slow-Go, Not Go-Go

September 19, 2016

Last week gave us some clarity over whether the consumer will continue to lead economic growth and whether the manufacturing sector is as bad as the surveys suggest. Unfortunately, most of the data came in below expectations, showing that while the recovery continues, there is little evidence of any acceleration this quarter.

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The Time Horizon Problem

September 16, 2016

With market turbulence continuing today and questions pouring in, I am struck once again by the core issue we’re wrestling with here: the time horizon problem. Although we get meaningful results in the long term, we often feel compelled to react in the short term. 

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Boom Times Ahead (Did I Really Just Say That?)

September 15, 2016

I’ve been traveling this week, spending a day in Washington talking with the press and then speaking this morning at the Financial Planning Association conference. These trips are always useful in that I get a chance to bounce ideas off a lot of people in the real world. They can also be surprising. Not so much in the questions I’m asked—people are worried about the economy, worried about the markets, wondering what’s next—but in what comes out of my mouth when I answer them.

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Great News—Median Income Rises!

September 14, 2016

In one of the most encouraging headlines we’ve seen recently, the median U.S. household income rose in 2015 by the most since the mid-1960s.

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September Volatility: What It Means (and Doesn’t Mean)

September 13, 2016

After months of relative calm in the financial markets, we’ve seen big bounces over the past several days, down and up and down again this morning. What’s going on?

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Monday Update: An Unpleasant Surprise from the Service Sector

September 12, 2016

There was only one major economic report last week, but the data it presented was a very big negative surprise. The ISM Non-Manufacturing Index, which tracks the service sector, was released on Tuesday and showed a decline from 55.5 to 51.4—a six-year low and significantly worse than the expected small drop to 54.9.

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Bad Day on the Stock Market

September 9, 2016

The big news as I write this is that the stock market is down more than 1 percent. That translates to more than 200 points for the Dow, 30 points for the S&P 500, and 80 points for the Nasdaq.

Looking at the screen, I see nothing but red. Ouch.

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Monthly Market Risk Update: September 2016

September 8, 2016

Just as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.

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Economic Risk Factor Update: September 2016

September 7, 2016

After the good news a month ago, several of the major economic indicators I track are moving downward once again. The service sector was the biggest negative surprise, but job growth also came in below expectations. While other news was positive, particularly in the realm of consumer confidence, and there are no signs of immediate trouble, weak data for the business sector suggests the recent rebound may have been only temporary.

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Monday Update: Consumers Rocking, Business Rolling Over

September 6, 2016

Last week’s economic data showed that U.S. consumers continue to earn and spend while business continues to struggle. With both income and spending up, and surprisingly high levels of confidence, consumers are still driving economic growth. Business, on the other hand, has stepped back from the stronger results of the previous several months.

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Employment: The Big Picture

September 2, 2016

As I said yesterday, the jobs numbers are (in my opinion) the most important economic data we need to watch. It seems appropriate, as the Labor Day weekend begins, to spend some time thinking about where the labor market is going.

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Market Thoughts for September 2016 [Video]

September 2, 2016

August was a quiet but good month, as indices and the stock market were up in the U.S. and abroad. Hiring was strong, consumer confidence surprised to the upside, and consumer spending continued to grow. Still, as I discuss in this month's Market Thoughts video, the big questions concern volatility: Why is volatility so low, and is it going to continue?

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August Employment Report Preview

September 1, 2016

Of all the economic reports out there—and there are thousands—the one I follow most closely is the employment report.

Why? Jobs are the best single indicator of what the economy is doing.

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