To The Moon

The $.SPX(.SPX)$ soared to yet another record high, continuing its remarkable five-week streak of gains. The index climbed 0.8% yesterday, bringing its year-to-date increase to an impressive 23%. Meanwhile, the Nasdaq Composite, also up 23% this year, gained 0.9%, while the Dow Jones Industrial Average ticked up 0.5%, setting its own record high. Buoyed by strong performances from major stocks like $Goldman Sachs(GS)$ and UnitedHealth, the rally shows no sign of slowing down.

A Calm Day Amid a Busy Earnings Season

With bond markets closed for Columbus Day and a relatively quiet day on the earnings calendar, the momentum in equities continued undisturbed. Investor sentiment was boosted by strong market fundamentals, including corporate earnings growth and the Fed recent decision to lower interest rates.

The $Cboe Volatility Index(VIX)$ dropped below 20, signaling a period of calm in what has been a turbulent year. This marks the lowest level for the index in recent weeks and reflects investor optimism heading into a busy earnings season.

$VIX

Tech's Performance: The tech-heavy Nasdaq Composite is still about 1% off its July peak, but today's gains indicate that investors remain bullish on the sector. Tech stocks, which have driven much of this year's rally, are now being tested by earnings reports, with a particular focus on how companies are capitalizing on their AI-related spending. $NVIDIA Corp(NVDA)$ $Broadcom(AVGO)$

What Could Shake Markets Out of Their Calm?

Despite the recent calm, several upcoming events could jolt markets. Earnings season is ramping up, with investors closely watching tech companies to see early returns on the billions spent on artificial intelligence (AI) projects. Volatility may spike as major players report earnings and provide guidance on how AI investments are impacting their bottom lines.

• U.S. Election Uncertainty: With just weeks to go before the 2024 U.S. elections, uncertainty around the presidential race and several close Congressional contests is a looming risk. Markets generally dislike uncertainty, and tight races may lead to volatile trading in the final weeks leading up to Election Day. If the results are too close to call, market jitters could extend well into November.

• Fed's November Meeting: The Federal Reserve will meet in early November, and while a 25-basis-point rate cut is expected, any deviation from this forecast could unsettle markets. With inflation easing and economic growth remaining steady, investors are hoping for a continuation of the Fed’s supportive policies.

• Geopolitical Tensions: Ongoing instability in the Middle East poses risks to global markets, particularly if tensions escalate in a way that disrupts energy production or impacts supply chains. The situation remains fluid, and any significant developments could lead to a spike in oil prices, creating ripples across markets.

Major Companies Reporting

- Goldman Sachs and Bank of America: As major banks, these earnings reports will give investors insight into consumer spending trends, loan demand, and the impact of lower interest rates on profit margins.

-UnitedHealth and Johnson & Johnson: These healthcare giants are closely watched for trends in healthcare spending and how companies are adapting to a post-pandemic world.

-Citigroup, Progressive, United Airlines, and Walgreens Boots Alliance: Investors will be looking for signs of resilience in sectors like retail, insurance, airlines, and pharmaceuticals, as these industries grapple with a combination of inflationary pressures and evolving consumer behavior.

Conclusion

The stock market’s momentum remains strong, with the S&P 500 and Dow Jones Industrial Average setting new records, and the Nasdaq continuing its upward trend. While economic fundamentals and corporate earnings have so far supported this rally, several potential risks could disrupt the current calm, including earnings season volatility, election uncertainty, and geopolitical tensions…

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@TigerStars @CaptainTiger @TigerEvents @Tiger_SG

This report is for informational purposes only and should not be construed as financial advice. Market conditions can change rapidly, and investors should consult a financial professional before making investment decisions. Past performance does not guarantee future results.