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The Stock Market: Growing Clouds

May 02, 2021 12:03 PM ETSP500, SPY, DJI, COMP.IND, QQQ19 Comments
John M. Mason profile picture
John M. Mason


  • The stock market closed up for the month even though prices were down this past week: and the market remains very near historic highs.
  • The U.S. economy seems to be accelerating, but concern has been rising about rising Covid-19 action in India and other places in the world that might threaten continued U.S. expansion.
  • Furthermore, there is rising concern that the Federal Reserve will not maintain its purchase of $120 billion of new securities every month as real inflation threatens in the background.
  • Radical uncertainty still clouds the future.

Blue question mark background and dark space or room
Photo by carloscastilla/iStock via Getty Images

Stocks closed down for the week, but still near historic highs. For the month, a strong showing.

For the month of April, the Dow Jones Industrial Average showed a gain of about 897 points

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (19)

terryongarland profile picture
"Radical uncertainty"..the best line heard today..absolutely.
Does Powell speak regularly with Ron Klain, the Presidents' string puller, of going bold..rhetorical. The feeling is growing that the path economic prosperity can't be bought with "funny" money. The fact is anyone who has been on this planet for many decades has been living under the impression that capital has to be earned, not just handed out.
Political actors are embracers of the new religion..MMT.
Yet, we sit in the grandstands knowing in our being..this may not end well.
@terryongarland , Yes, but the Powell band plays on!
I have already eliminated my weaker stocks. The remaining stocks are expected to rebound after any hypothetical market correction. Now... Golf. Fishing. MLB. Life free from COVID19.

Dry powder sits ready. For this month. Six months. A year. Years.

SA: the safety of cash is balanced by the regret of cashing out too soon. Inflation is everywhere and growing significantly now.

My POV is smarter people know citizens are flush with COVID19 benefits. The stage is set; the players are busy.
Eric Bradley profile picture
Not sure I buy the weakening of USD. I watch the EURO. It’s been around about 20 years. Dollar/reached parity at one point when it was strongest, and took about $1.60 to buy a Euro one point , when weakest.

We are going to hit $30T national debt this year. Currently it takes $1.20 to buy a Euro. That is a bit weaker, it was around $1.10 last year, but that was a covid year, and the USD is where money goes during high risk.

We are heavily in debt, and growing the debt massively, but the USD is within the normal trading range against the EURO, and at the stronger end of that range.

Seeing inflation in input products: lumber, copper, corn, etc. Housing prices are rocketing up. Hasn’t hit food prices in a significant way yet. We will see.

Jamjack profile picture
Very concerned, harder and harder to find undervalued stocks. "Pay their fair share". Tax and spend and print more cash with the press of buttons, flood the system. Commodities and input costs rising rates being artificially kept low when it is obvious they want to rise based on 10 year.

This is looking very dicey.
Charlie Munger calls bitcoin ‘disgusting and contrary to the interests of civilization’
@Phil Dumfee So much nowadays actually is.
I welcome a 10-15% pullback. It’s coming at some point and just another opportunity to load up on more.
Dividend Growth Fan profile picture
As soon as the FED even hints at the possibility of tapering the market will drop.
It's nice to read an honest opinion, versus some authors that push MMT, along with endless market gains and Utopia based on political ideology.
New market highs thanks to the Fed and your tax dollars. Enjoy the ride while it lasts.
Market Map profile picture
A decent, simple arithmetic and data driven method towards identifying periods when the odds of equity assets having produced a "significant" decline were high, has involved the use of a simple observation of the SP500 price in relation to its "moving average", and where this lies within the continuum of the four year "Presidential term".

Using a measurement of market returns starting from the month of July, since 1933, some of the most negative 12 month market returns have been "July through June" periods commencing within "first" years of Presidential terms - this when the market "trend" was negative ( applying the SP price / moving average mentioned, ( Table 2 https://tinyurl.com/yyf48e4q )). Conversely, July through June periods commencing within "2nd" years of Presidential terms have produced some of the best forward 12 month returns ( Table 4 ). With this strategy, the "holding" of equity assets ( "offensive" portfolio allocation ) occurred over 85% of the 90 year historical sample, and the periods identified as "high risk" ( "defensive" allocation periods ) occurred 15% of the time ( Table 7 ).

At present, the SP 500 price resides "above" it's monthly basis moving average. So, with two months to go, a positive SP500 / moving average relationship into June 30th seems likely. And, as strategy conditions describe in the study, if the moving average configuration has been positive in June 30th of the 1st Presidential year, the market in the second and third Presidential term years, has a significant chance of producing positive returns also ( see Appendix, Table 1 ).

This table https://imgur.com/a/Q0C8oK9 shows three year returns of the SP500 and a 50/50 mix of SPY/QQQ when incorporating the strategy, with the 3rd Presidential term year June 30th market trend being "positive", these periods occurring over a variety of economic and geopolitical environments, inflation levels, Presidential administrations, Fed easings / interventions, etc.
stoney500 profile picture

Answer is diversification
TDune75 profile picture
The “can’t lose the FED has your back so BTFD” narrative for the past decade has probably run its course. Either the FED pulls back & interest rates go up, or inflation rears its ugly head with price increases transferred to the consumer or companies taking it on the chin wrt earnings. A no win situation for the current excessive equity valuations. Great article.
Grisby profile picture
Hold, hold until you see the whites of their eyes (interest rates rising), then all hell will come unleashed.
The good news the Stocks going to climb higher.
The bad news we are going to see big correction this quarter.
The best advice stay caution
There is a man printing money like mad. Could he be classified as a mad man? He is bringing on the highest inflation not see since the 1970s.
Who was employed making fake $20 bills for the Fed?
yorgo profile picture
Great article
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