The “Heat Map”

Posted on October 29, 2014 by The Weekly Commentary

Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: We grade this factor to A- (very favorable)

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

BUSINESS PROFITABILITY: We CONTINUE to rate this factor B- (slightly above average). In general, the third-quarter earnings season has shown healthy growth. With over 40% of the S&P 500 components reporting, some 75% have beaten earnings-per-share expectations and 60% revenue projections, above the five-year average.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We have added the risk of an EBOLA pandemic to the “powder keg” in the Middle East to the situations to be watched. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 3 at this time. Risks continue to lurk, and they deserve our ongoing attention.

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