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 equals B+ (very favorable). Gasoline prices continue to drop. Imports have become cheaper due to the strength of the U.S. dollar. Low interest rates will help real estate, an important component for the consumers’ wealth effect. These trends put more money in the pockets of Americans coming into the all-important Holiday shopping season.

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. The market assessment of the probability of a rate hike has increased markedly since the last FOMC meeting on Oct. 27-28, notes J.J. Kinahan, chief strategist at TD Ameritrade. Back then, fed-funds futures predicted about a one-in-three chance of a December hike. By Friday, that had grown to a 70% chance. He will take that as a definite for the hike. Over the past two years, the fed-funds futures market has been one of the most accurate predictors of the FOMC’s rate-related statements. More than once the FOMC’s more aggressive rate forecasts have had to move toward the lower rates the futures markets were indicating.

The next big milestone is the Fed (Open Market Committee) meeting which will occur December 16 – 17.

BUSINESS PROFITABILITY: This factor’s grade is a C (average).

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 5. These risks deserve our ongoing attention.