Greetings from Henderson, Nevada. We made the annual trek from the summer quarters on the east coast to the Silver State (which is the largest domestic producer of gold) and did so safely. Along the way we made a few stops including the Gateway Arch in St. Louis, the Cadillac Ranch in Amarillo, Texas and the Painted Desert / Petrified Forest in Arizona. Also, we spent one night in Pontoon Beach, IL. Though, we failed to find a beach or a pontoon. Speaking of which, we are renovating our pontoon for next summer on Lake George. Book your rooms now.
In Oklahoma City, we once again had the opportunity to meet up with my Pi Kappa Alpha fraternity brother Mark and his lovely wife Lily.
What would be a cross country trip without research visits to shopping malls and fast / casual dining restaurants? Or me banging on my mobile devices all along the way? Needless to say; the country indeed is experiencing an economic expansion.
However, while on our journey, the third quarter ended, and the fourth quarter began. Whereas the third quarter was quite robust for stocks, so far in October the stock and bond markets have taken it on the chin. So, before you get a bustle in your hedgerow, let me hypothesize what is going on.
The US Federal Reserve tightened Fed Funds rates another ¼% as the third quarter ended. As the fourth quarter began the bond market sold off rather abruptly pushing the benchmark 10-year US Treasury Note to nearly 3.25%, a level not seen since 2011. It was only a matter of time for the 10-year to go from 3.00% to 3.25%, so nobody should be shocked. Of course, rising interest rates equate to lower bond prices.
Concurrently, stocks got a bit of indigestion after most major indexes rose to all-time highs last week. Again, this is not a shocking development given the fantastic run stocks have been on the past three years. The mistake was not being fully invested in that period rather than selling out at last week’s highs. Profit taking ahead of earnings season is typical. Of course, growth and tech stocks have pulled back more than other sectors. Still, despite rising interest rates, financial stocks remain in the doldrums.
It did appear that the selling dried up in yesterday’s session as the Standard & Poor’s 500 (SPX) Index is finding technical support at its 50-day moving average. Also, except for Alphabet (GOOGL), the FANG stocks all closed the session in the green.
I remain steadfast in my call for a strong fourth quarter of this, the mid-term election year and the subsequent first quarter of next year, as the stock market is still on its Stairway to Heaven. It will not get off until offshore tax-related cash flows cease repatriation, earnings growth slows down dramatically and job gains turn to losses. We just need to get over this case of Interestgestion (I will lay claim to coining that phrase) which is fear of rising interest rates taken together with some stock profit taking.
P.S. Mazel Tov to Jon and Dayna on their wedding. May they have many years of health and happiness together.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, GOOGL, NFLX, SPY, SSO & SPXL although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage, and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
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