Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is A- (very favorable). Favorable activity in the housing market continues to support growth in the level of spending.
THE FED AND ITS POLICIES: This factor is rated A (very favorable). The FED’s recent meeting minutes indicates the Fed probably will remain on a long and slow path to hiking rates.
BUSINESS PROFITABILITY: This factor’s grade is rated a B- (above average). The 3rd calendar quarter earnings will be released during the next 3 weeks. As usual, poor reports will lead to continued investor skittishness, but decent earnings will boost market confidence. And given how bad profit growth has been during the last 6 calendar quarters, we feel we do not need great earnings, just good enough earnings.
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 4. These risks deserve our ongoing attention.