Friday, October 30, 2015

The US Stock Market Just Finished Its Best Month in 4 Years

The Dow Jones Industrial Average rose 8.5% in October, its biggest monthly percentage gain in four years. Thank you, Janet Yellen.

In addition to the Dow industrials’ big gain, the S&P 500 rose 8.3%.

It's a near global money printing craze.

In Europe,  the Stoxx Europe 600 climbed 8%, its largest monthly percentage gain since July 2009. Japan’s Nikkei rose nearly 10%, the biggest percentage climb since April 2013.

The idea that we are somehow in a Bear Market makes no sense. As I have been reporting in the EPJ Daily Report, there was a bit of a slowdown in money printing by the Fed over the summer, but that is now over. The major threat now is greater than generally anticipated price inflation in 2016.



  1. This is a bit of cherry picking don't you think? The markets swooned in August/September and now have basically returned to the previous levels.{"range":"3mo","allowChartStacking":true}

    Further, I do not know anyone that is arguing that we are in a 'bear' market. The indexes are at or near all time highs. What is being argued and what has MUCH merit is that there is a disconnect between the markets and the underlying economy. Does 1.5% Q3 GDP growth support a market at all time highs? Moreover, check out these numbers culled from Bloomberg:

    S&P 500 Revenue Growth*

    2015: -2.9%
    2014: +3.8%
    2013: +3.1%
    2012: +4.1%
    2011: +11.2%

    The 'boom phase' is sputtering out. The economy is at stall speed and unless it picks up dramatically in the near term, the markets will correct to reflect this reality.

    1. Well, it would be cherry-picking if I didn't make clear in the post that money supply did slow over the summer and a downturn was expected then because of that . A point I touch on extensively in the  EPJ Daily Alert.

      As for your theory that the boom phase is "sputtering out" please explain on what theoretical basois
      you are making this claim. It certainly isn't Austrian School Business Cycle Theory

    2. The slow down in money supply over the summer resulted in the market sell off in August/September - OK fair enough, but my main point was that it is disingenuous to post a headline of the market 'having its best month in 4 years' when in full context the market has only returned (and not exceeded) the level it was at in July. That is akin to a money manager saying nothing to his client after August and September closes and than calling him up in October and telling him what a great month he delivered.

      I do not have a theory to share concerning my opinion that the boom phase is sputtering out but there is a host of data points that certainly lead one to believe it. In addition to the clear downward trend in S&P revenue figures I posted above, here is another:

      'New orders for manufactured durable goods in September decreased $2.9 billion or 1.2 percent to $231.1 billion, the U.S. Census Bureau announced today. This decrease, down two consecutive months, followed a 3.0 percent August decrease. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 2.0 percent.'

      There are plenty of others and I do not argue that the ones you have posted indicating a 'boom' portray a different picture but one gets the impression from reading your posts that the idea that there cracks in the 'boom' is heresy and not worth discussion. David Stockman, one of the EPJ contributing columnists posts persuasive articles almost daily from the other side of this debate. From an article he posted on 10/30:

      'To wit, during the first three years after the recession bottom, nominal GDP grew at a 4.0% rate. While that’s still well bellow the historic trend, the more important point is that nominal GDP growth has been steadily decelerating since Q2 2012, not picking up speed as endlessly claimed by the Kool-Aid drinkers.

      Therefore, when it comes to the single most important macro variable in a debt-driven economy—–that is, nominal GDP—–you can forget about the winter snow excuse or the inventory adjustment rationalization that have been offered to explain disappointing results in recent quarters.

      The fact is, this quarter’s tepid 2.9% GDP growth over prior year is unequivocal proof that the US economy is stalling——-and notwithstanding the massive monetary “stimulus” that has been thrown at it by the Fed.'

    3. "The 'boom phase' is sputtering out. The economy is at stall speed and unless it picks up dramatically in the near term, the markets will correct to reflect this reality."

      Yes. However, if QE4 is launched, it would extend the limping along out even further. But agreed, the downturn has begun. The only question is whether the economy will deteriorate from where it is now rapidly (and then reset to health) or deteriorate slowly in the most drawn out way possible.

      If indefinite money printing could indefinitely sustain the misperception of prosperity for manufacturers and consumers, then Japan's economy would be a raging success and the concept of malinvestment would be irrelevant.