Those that follow financial markets follow news, and recently that has presented a challenge. Maybe it’s because I’m getting older, but it seems to me that bad news has dominated the last few months. Terrible events both natural, such as earthquakes and hurricanes, or man-made, such as last night’s tragic shootings in Las Vegas, have dominated the news cycle, leaving everybody with a heavy heart.
The political situation is no better, with an increasingly bitter tone to the usual partisan divide, and international crises that at times seem to be leading to an inevitable conflict. It is easy at times like these to let the negativity influence how you feel about the market, but that would be a mistake as the one area where the news has remained positive: the economy.
Despite all the broader problems, the economic data and outlook remain strong, and the jobs report due out at the end of this week is expected to reinforce that trend. At this level of unemployment, it is no surprise that additions to non-farm payrolls are expected to slow somewhat, but the consensus expectation is still for just under one hundred thousand jobs to be added, with another tick up in wages and a steady headline unemployment rate.
In addition, we will possibly hear more this week on how the Fed views the economy and how they intend to decrease their bond holdings. There are several speeches by FOMC members scheduled, and, assuming their tone maintains the cautious optimism and steady as you go approach that came out of their last meeting, they can only help push markets to yet more record highs.
As I have said in the recent past, the balancing act that the Fed has pulled off since the recession is no mean feat. Offering stimulus without prompting inflation is extremely difficult, and the Central Bank’s ability to do that suggests that they will also be able to handle unwinding the policy as well, and a little more detail on how they intend to handle that would be welcomed by traders.
If you are determined to look for bad economic news this week, then the discussions around tax policy could offer an opportunity, but even there what looks like a negative could easily be viewed in the opposite light. Realistically, the “plan” released last week by congressional Republicans is no such thing.
It is a set of goals designed to start the hard discussion as to how tax cuts will be paid for and where they will be directed. As policy get hammered out there will no doubt be some disagreement, but the things most supportive of the market, a cut in the corporate rate and a provision allowing the repatriation of profits held overseas, seem to be getting broad support.
There are even a couple of company specific-things expected this week that could boost stocks, most notably Google (GOOGL)’s product announcements scheduled for Wednesday. There is a feeling among many analysts that they will offer some surprise news in addition to updates to Google Home and their suite of phones.
Without knowing what will be said it is obviously impossible to know how it will be received, but in the past these announcements have been greeted either positively for Google, or seen as a plus for rivals Apple (AAPL) and Amazon (AMZN).
So, as important as all the bad news is it is also important that investors stay focused on what is directly relevant to the market, and in that regard, it looks like we are in for another positive week. At some point stocks have to correct, but for now the positive economic news keeps coming, and as long as that is the case we will keep hitting new highs.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.