Once again, the S&P 500 is trading near the top of its recent range. Maybe it is a follow through on yesterday’s big leap or maybe it is the decent economic data out of China and Europe. Then again, maybe it is Fed signaling “steady as she goes.” It is hard to pinpoint a single reason for daily market movement most of the time, but over time, it is not so hard to pinpoint catalysts for market movement.
- About 96 percent of S&P 500 companies have reported results, with profit growth this quarter of 5.5 percent and revenue up 2.8 percent, according to Thomson Reuters. While more companies have topped earnings expectations than usual, fewer have beat on the revenue side.
The above is a mixed bag, when you consider that less companies on the average improved on the revenue side. However, the fact that more companies on the average topped earnings and both profit and revenue growth are up speaks to a catalyst for the market still trying to bump through and stay above its ceiling.
- Federal Reserve policymakers last month began to lay groundwork for an eventual retreat from their extraordinarily easy monetary policy with a discussion of the tools they could employ to accomplish the task.
Given the drumbeat of the breathless media regarding Fed policy as the primary reason the market has moved up over the last five years, it is rather perplexing that the market is still trying to break through its ceiling. After all, logic would suggest that as the Fed prepares to wind down its “extraordinarily easy monetary policy,” the market would wind down with it.
So far, though, as the Fed has cut its bond-buying in half and it has suggested it will probably raise interest rates in mid-2015, the market has, well, not responded negatively. In fact, since the Fed actually began winding down its economic-support last December, the S&P is up some 73 points.
My point? Economic and market fundamentals are far more catalyzing for the market over the longer term than any news about the Fed, or China, or Europe, or the US, or Ukraine, or …
- Marc Faber, investment guru and the editor of the Gloom, Boom and Doom report, warned on Thursday that stock markets — particularly in the United States – were vulnerable to sharp falls.
Now, how is that for going out on a limb? Interestingly, Mr. Faber said at the end of his interview that,
- I’m not predicting a complete collapse because money printing can go on almost endlessly but it will have…unintended consequences.
My guess is after so many wrong calls over the last few years Mr. Faber has learned his lesson about predicting a market collapse. Nevertheless, the breathless media still calls upon his “expertise” regularly to keep us all informed as to the true state of things in the market, such as the market is only up because of Fed policy. Thank you, sir. I feel so enlightened now.
- As a tool available to a reasonably wide public, the Internet is only twenty years old, but it is already the fundamental catalyst of the broadest based and fastest technological revolution in history. It is the broadest based because over the past two decades its effects have touched upon practically every citizen in the world. And it is the fastest because its mass adoption is swifter than that of any earlier technology.
The above is both obvious and not. Most folks understand the ubiquity of and the dependence we have on the Internet, but many as well do not understand the profound change it has brought and will bring. Societally, this is an interesting discussion, but in the market, it is profoundly important that it be understood. Change has come, true, but it is still coming, and coming fast, in every facet of our lives and to understand this is to understand that opportunity is everywhere.
- The French company SigFox says it picked the Bay Area to demonstrate a wireless network intended to make it cheap and practical to link anything to the Internet, from smoke detectors to dog collars, bicycle locks, and water pipes.
Because of the Internet and the changes it has brought and will bring to an innovative market place, it is likely the global economy will benefit for years to come, much like the European economy benefited from the “advanced” technology of a printing press at the start of the Renaissance.
- Once inside a home, Nest starts its real work: gathering data. It has a motion detector; sensors for temperature, humidity, and light; and algorithms that learn residents’ habits and preferences.
Thus, all the talk about stagnant economies and Fed propping is, well, speculative chatter based on selected near-term data points here and there. The reality is that history is a guide, at least as it regards technological evolution and its influence on the market.
True, it took some 150 years before Europe truly began to reap the benefits of the printing press, but that is because it took that long to teach enough people to read. In today’s world, both young and old are learning “to read” on the Internet and that is happening fast, oh-so-fast.
Ignore the chatter. Keep your mind open and your eyes searching for market opportunity.
Trade in the day; invest in your life …
