How Much Is Enough? – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

After a blistering pace in the first 11 months this year the sizzling hot S&P 500 is up a record 28%, beating all expectations of economists and market gurus. Can the markets continue the rest of the year and into 2025 at that rate? Recently released Jobs data sparked the market the past week, while also giving the Fed’s Mr. Powell more reasons for a rate cut this month. Again Mr. Powell reiterated, “the economy is looking better which gives the governor’s time to digest a possible rate cut. Unemployment crept up slightly to 4.2% according to the Bureau of Labor Statistics with techs and chip stocks moving higher as the market powers up, bond yields weakened as the 10-year Treasury yield slid to 4.150%, down from 4.18% on Thursday.

Stocks were sluggish at Monday’s open with investors and traders fearful that stock valuations were approaching concerning high levels after the 11 month frenzy this year driving the bull market to continued new index highs. There are worries over the ability of the many star performers to generate consistent earnings every quarter. A major investigation by the Chinese government into the actions of Nvidia with possible anti-trust violations cast a cloud over the marketplace as the magnificent 7 and chip leaders lost momentum. The Dow Jones Industrial Average floundered, dropping 240 points as the session ended. Both the Nasdaq Composite and the S&P 500 were off 0.6%. “We’ve just had this impenetrable broad-bassed rally, arguably since the election,” said Sylvia Jablonski, chief investment officer at Fund Manager at Defiance ETFs. “It makes sense that markets are going to pause especially ahead of CPI tomorrow.” As the markets “keep-the-pedal-to-the-metal,” the bond market fell slightly, to just above 4%.

Tuesday’s market was flat as all three indexes slid down, still reacting to worries about stock price levels. Many analysts have openly argued that valuations , while still climbing present concern, issuing caution going forward. Wednesday, the Bureau of Labor Statistics released the CPI (Consumer Price Index), slightly higher, well within conservative expectations at 2.7% year over year for November, over October’s 2.6%. The market’s reaction was positive as investors have pretty much ‘digested’ that a rate cut will occur in December. The Nasdaq Composite neared a major milestone Wednesday closing in on cresting 20000 as techs, AI stocks, including the Magnificent 7 march upward. Thursday’s mortgage rates are now 6.6%, dropping slightly over the past three weeks, giving home buyers a ‘nudge’ According to the NAR, (National Association of Realtors) new home and existing home sales are slow, with signs that lower rates will stimulate buying.

Food Commodities have seen prices soar as adverse weather conditions impact crop production. South America (Brazil), South Africa, Malaysia and Far Eastern Countries have experienced extreme heat, dry conditions and either heavy flooding or dry rivers this past summer. Coffee futures have surged to record highs, breaking a record established in April 1947. Yes, your morning ‘eye-opener’ will cost you more. Orange Juice prices have also soared as ‘greening disease’ has destroyed major groves in Florida. West Africa cocoa bean growers are besieged by severe weather, losing nearly one half of 2024 production, with prices skyrocketing for chocolate makers. Judy Janes, a Panama-based Commodities and Futures analyst said, “Consumers are unlikely to quit coffee cold turkey over higher prices, but such expensive beans are still likely to reduce demand.” That may be, but don’t count out the magic of the morning, “JOE.” Coffee is King!

RUMBLINGS ON THE STREET

Mike Jonson, (R.La.), House Speaker, WSJ – “We have long lamented the size and scope of the Government, that it has grown too large. And let me be frank about this: Government is too big. It does too many things, and it does almost nothing well,” said Mr. Johnson.

Megan Horneman, chief investment officer at Verdence Capital Advisors, WSJ – “The markets are continuing on this fear-of-missing-out momentum trade,” Ms. Horneman said. “We’re cautiously optimistic about equities over the next 12 months but, at the levels they are at right now, I think they’re borrowing from some of 2025’s return.”

Saira Malik, chief investment officer atc Nuveen, Barron’s – “We could have sticky inflation and a stronger economy,” she wrote, “The markets were optimistic earlier this year that inflation was decelerating at an acceptable rare, but that last mile will be difficult for the Fed to tackle.”