Of late, the internet has been flooded with posts by “veterans” dishing out negative news about the US —economy and stock market are on the verge of collapse (see below).
When you come across such posts, how do you make sense of them?
Personally, it depends who is dishing out such news?
For instance, Mr Marko Kolanovic from JP Morgan is high profile when it comes to the US market.
How could he not be, coming from $JPMorgan Chase(JPM)$, US #1 international bank.
Sometimes he makes sense but many a times, he,…. (fill in the blanks yourself ok).. LOL!
Then you have Mr Robert Kiyosaki, accidental writer of best seller “Rich Dad, Poor Dad”.
Listen to him is akin to listening to Ms Cathie Woods.
Why would anyone listen to him when:
He professed that his investments are in property than US stocks. He “should” be more of an “expert” in property than equities, right?
He has filed for bankruptcy several times, most recently in 2012. Speaks volume about the man and his investments, no? LOL!
It is exactly times like this that one needs to dig deep and believe in oneself.
This implies laying the foundation and doing a lot of readings to gain knowledge and grow as an investor.
We could defer to selected “experts” on their viewpoints.
However, “only we will have our best interests at heart”. And only we know ourselves best.
How I see US market from October 2023 onwards
It is based on the following tangibles: (see below) that I drew my conclusion
Official data - looking forward.
Latest current affairs - looking sideways.
Past market behaviour - looking backwards.
(1) Official data.
As I could not find the above information centrally, I compiled mine and sharing it with readers in this post.
Save to conclude that Year 2021 is a “freak” year because of the exceptional conditions that everyone has “suffered” as a result of the covid pandemic.
US economy is slowly but surely on a recovery path; albeit a painful journey especially for businesses due to the many interest hikes by the Fed in a bid to arrest rising inflation that peaked in 2022.
Inflation - both PCE & CPI are cooling at a slower pace than the Fed had anticipated & wanted.
The US economy added 336,000 jobs in September.
Latest data is nearly double the 170,000 economists surveyed (by Bloomberg) had expected.
This clearly indicates that Labour market is not cooling as fast as the Federal Reserve would like.
September data also saw the highest monthly job total since January.
The largest increases in Friday's data were from [a] leisure and [b] hospitality, where 96,000 jobs were added.
Is this bad overall? Not necessarily as long as other official data continues to dip, really.
As if having one war (Russia/Ukraine) is not bad enough, the Hamas attack of Israel was a shock.
It is hoped that it would not escalate into a full-scale war because we know which country will win.
Israel armed forces is not to be trifle with.
However, US market seemed to be “affectëd” by the attack miles away as the government’s aid might be curtailed by the lack of a House speaker (see below).
Will all these come to pass eventually? To be seen!
(3) S&P500: Past Behaviours.
Due to limited real estate, I will cover one of the main composite index, the $S&P 500(.SPX)$.
Many may argue that economic conditions (GDP, Interest, Inflation) between past & present are vastly different.
While this is “true” at many levels, no harm taking a look before, deciding (for oneself) if it is indeed so, right (see below).
* Recommend: It will be useful to superimpose the “(1) Official data” (see above), against each yearly S&P 500 chart.
S&P 500 [Sep to Dec performances] from 2019 to 2023
Zoom in focus on:
The S&P 500 composite index performances.
For 4 months, between September to December.
For 4 years, from 2019 to 2022.
3 of 4 October performances were in uptrend swings. It was in Year 2019, 2021 and 2022.
1 of 4 October performance was in downward trend. It was Year 2020, onset of Covid pandemic.
S&P 500 - Sep to Oct, 2023
Referencing 2023 official data, US 2023 economy is fighting very hard to sustain its 2% growth.
This year’s GDP is the “best”, when compared to 2022 and 2020.
It comes at a time when interest rates are at their highest in the past 5years, making it challenging to conduct business across all sectors.
Inflation although cooling from its 2022 peak, is still much higher when compared to 2019 to 2021.
In 2023, S&P 500 peaked in July and had 2 slightly lower peaks in August & mid-September before it began to dip.
It will be a challenge for US market to recover all “lost” grounds in October.
A more “realistic” outcome would be to recover at least 30% by end October, leaving remaining 70% recovery to be carried out in November and December.
This is only possible with the caveat that the Fed does not further hike interest in 2023.
Keeping interest rates status quo leave room for corporates and small & medium businesses to continue to grow, further propelling GDP.
Hope the Fed sees it too, instead of its recent hawkish socialization.
Do you think US market will recover in October 2023?
Do you think US market will continue to rise in November and December 2023?
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Comments
l continue to add to positions, but with heightened caution associated with having entered a market 'correction' built upon recession fear associated with inflation and interest rates, as well as geopolitical events in the US and Middle East--thus, I've adjusted my LBOs downward.
Great ariticle, would you like to share it?
Great ariticle, would you like to share it?