Hope you are all doing well. Heavy selling of technology stocks weighed on the NASDAQ, which retreated 4.5% for the week. It is now 5.3% below the record high it set on October 6. The S&P 500 fell 1.9%, while the Dow managed to post a fractionally positive result. Elon Musk debuted the flying car this week, so I have broken down this week’s update using some of his notable quotes.
When something is important enough, you do it even if the odds are not in your favor.
It is important not to let fear dictate your investment decisions. We got the beginning of a sell-off in technology stocks. Every few months we get these pullbacks as all the television pundits spew concerns about AI-related debt, revenue expectations, and higher rates. Yet every quarter tech companies continue to post stellar results. There is no reason to think this quarter will be any different. Don’t shift out of growth. View any continuation of this dip as a buying opportunity. We have perhaps the strongest corporate earnings ever, a good labor market, resilient economic growth, and healthy consumer spending. Those fundamentals point to the bull market continuing, meaning drops in the market should be used to move money off the sidelines and into the market. I expect the market to be volatile the next 2 weeks, maybe even scary at times. Don’t panic; the uncertainty of elections often causes volatility, which subsides after the results are known. With the big technology firms starting to report this week, expect bigger normal swings in individual stocks and sectors as earnings reports get released.
You should take the approach that you’re wrong. Your goal is to be less wrong.
Don’t get fooled by the rally in long-term bond prices. Yields of longer-dated U.S. Treasury debt fell for the second week in a row, with the 10-year Treasury ending the week at 5.08%, down from 5.24% the previous week. The 30-year yield was also down sharply at 5.43% from 5.60%. Bonds are still not a good investment. Rates are not moving consistently lower and if anything, will move slightly higher. We received two reports this week reflecting persistently elevated inflation at both the consumer and wholesale levels. Wednesday’s Consumer Price Index report showed a 3.7% annual rate in September, up from 3.4% the previous month. Thursday’s report on producer prices showed wholesale inflation rose 6.3% annually in September, the highest rate since 2022. Stay away from bonds; use CDs and Fixed Annuities for longer-term safe money.
Constantly think about how you could be doing things better.
Retailers have had to adapt more than just about industry. Retailers have faced massive industry disruption. The power has shifted to hyper-informed consumers. Digital platforms have swallowed attention, and the boundary between online and offline shopping has dissolved. Still, U.S. retailers continue to report surprisingly good results. This week we got a bigger-than-expected gain, with sales up 0.8% in September versus economists’ consensus of 0.3%. This also points to consumers continuing to spend, which is good for the economy.
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