The stock market soared yesterday because…
==============
First, the numbers…
Yesterday, the stock market soared … the S&P was up 5.54% to 3,956.
Let’s put that number in perspective…
The S&P at 3,956 is:
- 3% higher than when Biden was inaugurated (01/20/21 S&P = 3,841)
- 17% lower than the sugar-high market peak (12/27/21 S&P = 4,766)
- 11% higher than the Biden era market trough (10/12/22 S&P = 3,577)
To summarize, the market today is about where it was when Biden was inaugurated … has recovered about 1/3 of the 25% peak to trough decline … and is up 11% from the trough.
So, you can either feel bad (still down 17% from the peak) … or good (recovered about 1/3 of the peak to trough decline).
=============
For today, let’s focus on the positive … yesterday’s bounce … and ask “why?”
There were 2 near-simultaneous events yesterday morning.
- The reported inflation rate for October was down to 7.7%
- Media vote counting arbiters conceded that the GOP was on track to gain control of the Congress.
My take:
The 7.7% is statistically insignificant from the recent inflation running rate … it’s likely month-to-month noise … and likely driven by a decline in residential housing prices … which is, perhaps, a blessing for renters, but a curse to homeowners (whose home is a big chunk of their net worth).
So, I don’t place much weight on the 7.7% inflation rate driving the market gain.
=============
I think the market gain was driven by the near certainty that the GOP will control Congress and we’ll have split government gridlock for the next 2 years … and, at least, an end to reckless government spending.
Here’s hoping…
The Homa Files 