Fast Money Blog-10/2/21
As your number one wealth coach, from time to time you will need me to explain a few complex issues that are causing the U.S. Stock Market to pull back, decline or advance. This is one of those times.
This week we saw the U.S. stock market react negatively to five key economic issues affecting our economy.
They are:
Government funding.
Staving off a default on the country’s debt.
Pushing through a $1 trillion infrastructure bill.
Securing the votes for a defining climate change and social policy bill.
The Federal Reserve’s signal that they expect to raise interest rates in 2022.
I know this is a lot to consider, but here’s what you need to know:
On Thursday, September 30th, a government shutdown was avoided hours before funding expired at midnight, when President Biden signed a stopgap bill that would sustain the government’s current spending levels through Dec. 3.
However, if we don’t raise the debt ceiling, the U.S. could be just weeks away from defaulting on its debt for the first time ever.
Thursday, September 30th also saw a decision by Democratic leaders to delay a planned vote on a $1 trillion bipartisan infrastructure package at the heart of President Biden’s economic agenda. This delay is due to ongoing negotiations between moderates and progressives on the second part of Biden’s agenda, a $3.5 trillion bill that would significantly expand the nation’s social safety net and climate-change initiatives.
Finally, last week on Wednesday, September 22nd, the Fed said it could soon slow its large-scale purchases of government-backed bonds and hinted that it might raise interest rates in 2022.
The stock market does not favor all of this economic uncertainty.
When uncertainty looms in large quantities, institutional investors will take profits. There’s a reason why I ask that you hold 1/3 of your account in Dow stocks, because Dow stocks that pay a dividend withstand uncertainty in bull and bear markets. That said, Dow stocks such as The Home Depot, Inc. (HD), Apple Inc. (AAPL), and Microsoft Corporation (MSFT) all saw some profit taking during the week but managed to bounce back by Friday’s close.
I expect to see more volatility over the next five trading days.
Stay patient, stay positive.
Tyrone Jackson
The Wealthy Investor