Expect a strong stock market performance this fall, supported by stable economic growth, controlled inflation, and rising consumer confidence.
The stock market seems to be anticipating the Federal Reserve.
The Federal Open Market Committee (FOMC), the body that makes monetary policy at the Federal Reserve, is meeting this coming Tuesday and Wednesday.
Investors appear to believe that the Federal Reserve is going to reduce its policy rate of interest at the meeting and that the reduction will be 50 basis points, and not just 25 basis points.
Today, as a consequence, the Dow Jones Industrial Average hit a new historic high. The DJIA closed at 41,394, ahead of the past record of 41, 335.
The other two major indices are right on the edge of hitting new historic highs.
The Standard and Poor's 500 stock index closed at 5,636, just under its historical high of 5,667.
The NASDAQ index closed at 17,684, also just under its historical high of 18,647.
Positive news coming out of the FOMC meeting this coming week will just be the driving force for several more historical highs, and these new historical highs could run throughout the next month or two.
The real thing is that the economic numbers are really quite good and these, I believe, are only going to improve in upcoming months.
I have been writing regularly about these possibilities in many of my posts this fall.
For one, the economy seems to be chugging along at a pace that is very similar to what the economy achieved in the 2010s. For the first two years of this economic expansion, the time period since the Covid-19 pandemic and the following two-month recession that happened, the economy has been growing at a compound rate in excess of 2.0 percent.
For the period of economic expansion following the Great Recession, the U.S. economy grew at a 2.3 percent compound rate of growth up until the two-month recession that occurred in February and March of 2020.
The inflation rate is declining and is now very close to the Fed's target rate of inflation, which is 2.0 percent. My projection, in my last post, is that the U.S. economy will actually see the inflation rate drop closer to 2.0 percent in the near future.
The unemployment rate is near a 50-year low. Yes, it has been going up but one reason why the unemployment rate has been rising modestly is that the labor force participation rate is rising, which is a very good thing.
Other data further support this view.
My feeling is that the Fed is going to reduce its policy rate of interest and the economy is going to perform very well this fall.
I believe that as a result, consumer confidence is going to start rising again.
The economy will not be "blasting" away with records being set here and there, but the economy will be moving along looking much like what was achieved in the 2010s.
We would like faster growth, but the faster growth just doesn't seem to be there.
But, we are going to see price inflation come more under control.
And, we are going to see the unemployment rate stay close to its fifty-year low.
And, the stock market?
I think all of this discussion leads to the conclusion that we should see a relatively strong performance by the stock market this fall.
As a consequence, we will see quite a few more historical highs.