Markets always like to play a game of “Trick or Treat” as a much feared Shocktober turned into a Rocktober! While September was the worst month of the year (down 5%), October, a spooky month by historical standards, emerged as the best month of the year (up 7%). Now what?
The runway seems to be clear as we enter the best months of the year with the S&P 500 already up a whopping 22% year to date. 10yr yield will continue to rise helping the Financials. Energy stocks would chug along as Crude keeps climbing with its sight set on 100. Infrastructure stocks like Construction, Materials & Steel should continue to get a bid as the Dems touts the Trillion dollar package. Consumers will be in spending mode with all the savings from the Govt. printing press. So does this mean a full-fledge rally into the end of the year with another 10-12% higher? Maybe, maybe not. When everyone is on one side of the boat, chances of tipping are high. Inflation is on the rise (although no one cares), Fed tapering is on the cards (but the Markets expect the Fed to be behind the curve). Chip shortage is causing a havoc for Companies like Apple, General Motors (but Market is hoping that this supply-chain issue will ease as Delta fades and ports open up). Labor shortage is still a big problem as the holiday season approaches and the likes of Amazon & Fedex are starving to recruit 100s of thousands in the short term. By the way, did anyone notice the weak GDP print last week? Well, we know that bad news is good for the Markets …
Long story short, will the Markets “treat” us into the end of the year with a nice rally or “trick” us with a pull back that no one is expecting, remains to be seen. Happy Halloween!