Wednesday, October 16, 2013


It's over! Non-essential government departments will soon be back up and running; regular employees will return to work, and the folks who us taxpayers paid to keep us taxpayers from peeking at Mount Rushmore as we motored by will go back to doing whatever they were doing 17 days ago. Oh, and the treasury will uninterruptedly issue all the debt it needs to continue paying on all the debt it's accumulated. Whew! Did we dodge a bullet or what?

This 11th hour mini bargain gives the players till January 15th to hash out a real budget and till February 7th to negotiate the terms of a longer-lasting debt ceiling deal. That's plenty of time to tackle entitlements, tax reform, immigration reform, the Farm Bill, the Keystone Pipeline, etc., and to take a little well-deserved time off to celebrate the holidays with their families. I mean, this whole thing kinda crept up on them; they have a lot on their plates and God knows how many special interests to take care of. And don't forget, mid-terms are practically around the corner. Posturing, therefore, has to be their number one priority. I mean, what good are they to us if we don't reelect them?

Alright, enough with the cynicism, let's talk markets:

It's funny how we never invest our clients' money into the equity markets unless they have a multi-year time horizon, yet I often find myself addressing short-term dynamics. There is, of course, a method to my madness---my aim is to help our clients make sense of the forces that can move prices in the near-term, which seems to help them maintain a healthy longer-term perspective.

So, for the near-term, the market gets to take its eye off of Washington and onto stuff like earnings, jobs, productivity, sentiment, liquidity, interest rates, valuations, currencies, etc.---variables which are very, well, variable.

In the immediate term, it'll be all about the Q3 earnings reporting season, which is now underway. It's been a fairly mixed bag thus far---although expectations were not great going in, and I suspect that the politicians (the uncertainty they spawned) will serve as scapegoats for most of the misses. Therefore, a lackluster earnings season probably doesn't, by itself, derail this year's rally.

Beyond earnings, I could easily offer up a rosy near-term outlook---based on interest rates, liquidity, hedge funds' underperformance, the economy maybe picking up a little steam, relatively decent valuations, etc.---but I won't. For, as is always the case, I could just as easily turn devil's advocate and offer up a compensating short-term negative---the pending QE taper (although that one's a long-term positive), interest rates potentially spiking, the bond bubble finally bursting, more political posturing, the economy maybe losing steam, etc.---for every one of my positives. Which, by the way, is precisely why we never invest in stocks on a short-term basis.

Stay tuned...

No comments:

Post a Comment