One Of The Main Reasons For Stocks Hitting All-Time Highs

October 28, 2019

Karl Eggerss was on the Trey Ware show discussing that despite many indicators suggesting more economic slowdown, the stock market is at an all-time high.  He gives his main reason why.

Trey Ware:                         So as we look at your money for the week, stocks are threatening record highs today, busiest week for third quarter season. Earning season gets underway. S&P is within a half point of matching its entry day record high on Friday and it was just about three points from a record close. The Dow, again, ended about 440 from its own record peak as well. A lot of talk about the EU postponing leaving and the whole Brexit thing. You also have Microsoft, it looks like they’re going to open high today, maybe. A 10 billion dollar Cloud computing contract from the Pentagon. Amazon lower after losing that. Some questions, of course, about PG&E out in California and how that’s going to affect some of their stuff. And then, of course, we have the al-Baghdadi thing from yesterday and will that be reflected in the stock market? Karl Eggerss with is joining me. What about that, Karl? Do we see something like an al-Baghdadi killing, will that be reflected in the stock market today, you think?

Karl Eggerss:                      No, probably not. I think, personally, obviously, we all want a safer world and it’s awesome news for all of us. I don’t think it hurts the stock market, but generally speaking the big focus this week is going to be on the Federal Reserve. There’s a 90 plus percent chance they’re going to cut interest rates once again and they probably should given the fact that the bond market is telling you they need to do that. And we won’t go into the details of that, but basically Wall Street’s begging for another rate cut and really the concern, Trey, is that the stock market is doing extremely well. We’ve been talking about how the consumer is really keeping this economy going because of the spending and everything else that everybody is doing.

Karl Eggerss:                      The issue we need to watch is we’re watching how many hours people are working, which has started to fall. And if that continues to fall, guess what? If people are working less hours, they may have less money, they may spend less. So that’s something to watch over the next few weeks and couple of months. But I do want to reiterate something, everyone keeps asking me, “Are we going into recession? Are we going into recession?”, and the answer is the odds are still there. The odds are still that we don’t, but the odds are still there that we may have something in the next year and a slowdown. And the slowdown is continuing right now, but here’s the deal, we have to really distinguish between a recession and what the stock market does. Those are two different animals and you’re seeing it right now because the earnings coming out, the profit is what you’re buying. I always say that to you, that really we’re buying profits of companies and those are continuing to go up. The earnings beats, you mentioned a lot of them this week, are much higher than they were last quarter.

Karl Eggerss:                      So that’s really the key to this thing going up and continuing to break out to new, all-time highs, which all-time is a long time. And we got the stock markets continue to push forward despite the fact that people are still concerned about the economy flowing and the Fed probably going to lower rates.

Trey Ware:                         Well one other thing, I need to branch in here, and I only have a few seconds left, Karl. These California wildfires with PG&E, with them shutting down the power to so many hundreds of thousands, and I’m talking about hundreds of… well actually over the weekend it was close a million people without power over the weekend in California, that includes businesses. That’s going to be reflected in the economy as well. An economy like California is like a small country and when you are taking that much of the economy off-line for that amount of time like they’ve been doing out in California due to these wildfires, it’s going to be reflected in the broader economy. Karl, I got to go. We’ll talk about that some more another time. Karl Eggerss, again, from Trey Ware here, Ware and Rima next, KTSA.