The stock market subsided slightly last week but the movement may be noise. The Fear & Greed Index subsided to Greed.
The strongest trend since the Fed cut the fed funds rate by 0.5% is the rise in yields across the yield curve. Between 5 and 20 years the yield curve has resumed a normal, positive (though flat) slope.
TIPS yields have returned to the level that was normal before the 2008 financial crisis but not seen between 2008 and 2023. The Fed has achieved a decline in the inflation rate but large government deficits could cause inflation to resume in the future, especially if the economy heats up.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 was 3.3 percent on October 25. A strong economy is generally favorable for the stock market. The Cyclically Adjusted P/E Ratio (CAPE Ratio) is still at a bubble high so there’s still a need for caution.
Tech companies will report their financials in the coming week so the market could be volatile.
The METAR for next week is sunny with showers possible.
Wendy