Wow! The Dow Jones Industrial Average saw a bumpy month the first couple of weeks in October, but made up for those doldrums yesterday, gaining 547 points—all in one day! The catalyst? Some important and very positive earnings news from Morgan Stanley, who pointed to the resurgence of its IPO business; Goldman Sachs, who also enjoyed increases in its underwriting area; and Johnson & Johnson, who cited some nice sales improvements.
Overall, it just seems like folks were ready for some good news. Sentiment remains bullish, as you’ll see from our Advisor Sentiment Barometer, which barely moved this month. However, some caution is being advised—at least in the short term—as reflected in our Market Views section of the newsletter.
Wall Street’s Best Investments 810
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Market Views
Time to Trim Riskier Options
Most major market indexes were back on the move higher on Monday, led by real estate, consumer staples and utilities. Shares of technology companies were not participating, however. Nor were energy producers. And healthcare companies’ shares were largely flat.
A combination of fast-rising bond yields and continuing trade fears has stirred investors to cut riskier stocks from their portfolios, who are worrying that the huge profit margins among many of these companies will fall.
Jon Markman, Tactical Options, subscriptions@markmancapital.net, October 15, 2018
Correction, but Still a Bull Market
For the S&P 500 we are in phase 2 (no Head fake). A lot of people are trying to call a bottom here; we plan to be patient and wait for a bottom to actually form and complete. I note that a couple of pundits have turned bearish in a very public way. Clearly, they are hoping for fame from calling the next big debacle. We see all that as a positive development from a contrarian perspective. It is really important to remember that being successful in the market means paying attention to what the markets are actually doing. For the record, I am not bearish or bullish. At the moment the evidence suggests a correction within the context of a bull market.
John Bollinger, The Bollinger Band Letter, www.bollingerbands.com, 310-798-8855, October 13, 2018
Be a Little More Defensive
There are still more reasons than not that U.S. stocks, at the least, will slug their way ahead for a while (even if that means, as I suggest, flat to modestly-declining major indices while a more earnest “rotation” within the market goes on.) In the case of value-oriented, dividend-paying, stronger companies, this all is actually improving the environment to be taking/building positions in them.
To be sure, though the relative performance of the U.S. economy continues to be stronger than most anywhere else, both growth and corporate profits are peaking in America. But in my view, what I see does imply more of the same we’ve been seeing in recent days, and more dramatically so yesterday: Momentum names hammered, value recovering, “defensives” like utilities and REITs rallying, etc.
Chris Temple, The National Investor, www.nationalinvestor.com, 224-308-2587, October 11, 2018
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