The run in the stock market continues in October.  Cash on the sidelines, better than expected earnings announcements and money market yields close to 0% is causing investors to look at the stock and bond markets for higher returns.  Many people are still sitting on the sidelines – $3.4 trillion in cash – still worried about the market and the economy.  That is a lot of “gasoline” that can still spark the market higher.  Investors that are on the sidelines are using recent history – last year’s correction – as a guide for the future.  They expect the market to be bearish in the near future.  Most of the time, this happens only when these investors capitulate by putting their money to work at a time when the market is near its peak.  We are no where close to that happening.  Are we going into a bear market anytime soon?  We don’t think so.  Why?  Among other things, every bear market has been preceded by a rise in short-term interest rates.  The Federal Reserve recently announced that it does not anticipate a rise in short-term rates anytime soon.  When the Fed does start raising rates will be the time to consider getting more conservative.  It usually takes three or more increases in short-term interest rates before it negatively affects stock prices.

Your THOR team