Thoughts {10.24.18}

Markets turned around yesterday in the afternoon, coming back from down around 2% to finishing nearer to flat by the close.  Today we're looking like a lower open by this point but not by much.  Was yesterday the final whoosh down in this decline?  Hard to say but the indicators are getting closer to a level where it's suggestive that some sort of more sustainable rally might be attempted.  In my opinion all the worries we've been hearing were for the most part out there prior to the middle of September and it's likely that most of these have been sufficiently discounted so they're factored into next year at this point.  For most investors October probably can't end soon enough.

It is about 2019 now.  We're at that point of the year where 2018 is increasingly being looked at in the rear view mirror.  So far the augers for next year as far as the economy is concerned look pretty decent.  GDP will unlikely reach the same levels as this year but earnings should be OK.  Preliminary estimates I've seen are between 6-10% EPS growth.  At a minimum this should be supportive of stocks around these levels based on the fundamentals.  Of course stocks don't always trade on fundamentals.  Often they trade on sentiment, which right now is almost universally negative.  

I think the most likely scenario between now and the end of the year is for us to trade choppy between now and our elections and to find our footing sometime around that date.  Maybe we're putting in a bottom or maybe there's one more down leg left but probability would suggest we're closer to the end of this than the beginning unless there's some unexpected news out there that's going to dribble out in the near future.  I think then there is a greater probability of stocks mounting a more sustainable rally after the election's results are known into year's end.  I think there's a reasonable chance we could get back to the levels we saw in mid-September by the time we flip the page into 2019.  Of course all of this is a guess, albeit one based on a few years of experience in this business.  It has just as much of a likelihood of being wrong and is out here for informational purposes only.  Trade at your own risk.

Back Friday.