Stock Market & Crypto Currency Update – October 9th, 2023
Bottom Line: My first rule of money is to never let your money and emotions cross paths.The purpose of this story is to inform you as to what’s possible in a near worst-case outcome for the financial markets.The reason is to understand what’s possible, though unlikely, so you can plan soundly for your financial future unemotionally.The US stock market is the greatest wealth creation machine in the history of the world.Likewise, cryptos have created generational wealth for many who were early, however most investors in the crypto space have now lost money on their original investments.I want you to benefit from investing without making emotional mistakes with money.Historically, when investors attempt to time the market, they end up worse off than if they’d stayed with their original plan over 90% of the time.This is all about combating those types of mistakes.
Here’s how far the Dow, S&P 500 & Nasdaq are from their record highs:
DOW: -9% (flat last week) S&P 500: -10% (+1% last week) Nasdaq: -16% (+2 last week) Stocks started October much the way they ended September – trending lower.
That was until Friday’s jobs report helped fuel a rally on Wall Street as concerns that the US economy’s economic growth could fall into negative territory in the current quarter.Friday’s job’s report not only showed much stronger than expected jobs growth for the month with 336,000 jobs added during the month, but also came with positive revisions from prior months totaling an additional 119,000 jobs.That’s a blockbuster type of number.That said for those who might be skeptical about a suddenly great jobs report after months of weakening employment trends, there might be reason to be.The report stands in direct contrast to the ADP private sector jobs report last week which suggests there might be massive negative revisions in future months.The government’s first survey results are always revised twice before arriving at a final estimate.
The other trend which was consistent with the ADP Report was a continued decline in wage growth.
The annual inflation rate has ticked up for three consecutive months that we know about, while wage growth has continued to slide over the past year.This is why even a strong labor market doesn’t result in a good overall economic feeling in this country.
So about inflation…the reason I mentioned inflation has risen for three months that we know about is because on Wednesday, in this month’s CPI report, we’ll learn what the consumer inflation rate was in September.That will be key in determining what the outlook for Fed policy might be on interest rates and the overall direction of the stock market this week.
Also keep an eye on oil prices as the war between the Iranian sponsored Hamas terror attacks and Israel, is likely to impact the market.As for cryptos…
Digital currencies were largely flat to lower last week.
Bitcoin is sitting above $27,000 and Ethereum just above $1,600 .Meanwhile, the Bitwise ETF , which represents the top 10 cryptocurrencies, was off about 4% – showing weakness with 2nd and 3rd tier tokens.Questions about regulation remain.Will the federal government seek to compete with the current crypto players, or will they allow the digital currency space to evolve as it is? I can’t provide value analysis for cryptos currencies because they retain no inherent value, but I can for stocks because they do…
Here’s where the stock market stands based on fundamentals using the S&P 500 as benchmark.
S&P 500 PE: 24.60 S&P 500 avg.
PE: 16.03 The downside risk is 35% based on earnings multiples right now from current levels.That’s flat with a week ago as stocks were slightly lower with largely unchanged fundamentals.It’s 22% less risk than the highs reached last year.If a short-term decline at those levels wouldn’t affect your day-to-day life, you’re likely well positioned.If that is a problem for you, you should probably seek professional assistance in crafting your plan that balances your short-term needs with longer term objectives..
