No Rate Hike a Green Light for Stocks?
America's staggering wealth was confirmed once again on Friday with figures published by the Federal Reserve. Household net worth climbed $1 trillion in Q2 to just over $89 trillion. Not too surprisingly, the bulk of the gains came from the rise in stocks and real estate.
This math is really important to keep in mind when the market is tanking in fear. In fact, in 2009 it was a big motivation for me to turn very bullish as I absorbed the logic of John Rutledge, Ronald Reagan's economic advisor in 1980-81, who calculated the total assets of the US economy at $188 trillion, or 13X GDP. That's the foundation for our $25 trillion stock market.
Green Light for US Economy
That's the big-picture good news. And it means we still want to be buyers of the market dips in the strongest, healthiest economy on the planet. Sure it's got tax, budget, debt and other fiscal issues. But overall, US corporations, investors, and workers create wealth in the long run.
Now, as for the short run, this week's biggest market-moving event is the Fed decision. And it's a quarterly quant-fest with fresh economic projections, "dot-plots," and a bated-breath Q&A with Chair Yellen.
The question on many investor minds is, of course, "Will no rate hike be a green light for stocks?"
My answer: I don't think so. I believe it will be "sell the news" either way as we approach the election debates. So that means we don't need to rush to be buyers before Wednesday. We can wait and see how much volatility comes back and then pick our spots for the next 1-3 weeks .
Best,
