Even more Bullish..

How many times can I repeat bad news as good news? Last week, the Fed had its meeting-not every month but 8 scheduled per year-announcing no change in interest rates but expect cuts this year. Previous to the Fed meeting, inflation numbers caused concern in regard to any decline in interest rates this year. The fact that the Fed said it will lower rates do not raise rates was perceived bullishly by markets.  Even more bullish were the employment numbers last week that caused a large market rally.  Bad news was employment numbers were lower-good news is likely interest rate declines increased. Markets are at historic highs both in absolute numbers as well as valuations. Market advances are determined by earnings and the current real value of those earnings is determined by interest rates. Every dollar earned is worth more to markets and to you and me with lower inflation and lower interest rates. The positive momentum is continuing today, Monday.  

We have not discussed the yield curve recently. It is still inverted indicating concern about an economic slowdown. Hmmm, one month of employment growth lower than market expectations does not slow down make. Here in the SF Bay area though, every day we read about layoffs and downtown SF office buildings selling at 30% of their peak value so we are feeling a slowdown locally.  Whether this will spread nationally it is too early to say. Just remember if, in fact, there is an economic downturn it does not necessarily mean a stock market downturn.  

Look at Apple’s earnings which are actually lower than previous years.  Bad news, right? Well, they announced a huge stock buyback pushing the stock higher.  Amazon, Microsoft, Netflix and Google all beat earnings expectations while Meta disappointed because of spending on artificial intelligence.  Head spinning for sure.  

Some thoughts that make some sense to us about recent college unrest.  Those students who are the class of 2024 started their college years during covid.  When I went to college-including building takeovers in 1969-1970-social contact in person with no meaningful social media was the most important part of my education at Cornell University.  Those of you with children in college are familiar with what a different experience college was for you vs. your children.  Mental health issues from living in a covid world have affected students the most.  Understanding the fact that this would impact college students with the world can give us some insight into the complexity of the current college unrest.  

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