The market came through two of the worst two months historically (August & September) unscathed, and was resilient in October, the most volatile month. Could the best months of the year also run contrary to history? We do not believe so, but we still cannot rule out some backing & filling, and profit taking, prior to finishing the year strong.
We are seeing stocks being sold on fantastic earnings, a sign that the tech sector, especially the semi conductors, may be a little ahead of itself short term. A rotation to value and other less volatile sectors may be in the cards near term, but the strongest earnings and revenue growth remains in the technology sector. We expect any weakness to be bought, and like the last couple of years, we believe technology will continue its leadership role.
Though the Fed cut rates by 25 basis points yesterday, the Fed language suggest that a December cut is not a given. Just like with the last rate cut, the 10-year Treasury market rate has actually risen a bit. This could also contribute to any near-term market weakness.
Despite the potential for a Halloween scary moment, we remain bullish intermediate to longer term. We believe the earnings growth expected this quarter, and even into next year, justifies valuation levels that some fear are excessive.