AM 1150 Kelowna - Radio Rallies & Reversals

So the big news last week which propelled stocks and long bonds higher was the FED speak on Tuesday. The main take away is that the economic recovery is on shaky ground and the FED will continue to keep it's policy rate at the low end of it's target range, and at the very least maintain it's balance sheet with further quantitative easing as a carrot. Global stock indexes were positive for the week and back at levels not seen since May, with some even meeting or surpassing their April highs, respectively. Long Canada's and US Treasuries rallied hard with the 10yr Canada at 2.8% and the 10yr Treasury at 2.5%. Potential market moving economic news this week: Consumer confidence and the Case-Shiller Home Price Index in the US tomorrow; and on Thursday, US and Canadian GDP numbers.

Where are stock prices heading? Technically, the trend is up, but stock indexes are in overbought territory. Seasonally, the time to buy is towards the end of October, so there's time for a correction. Despite some weakening economic data, stocks are still anticipating future earnings growth, and the FED's announcement last week is probably welcome news for the bulls. A potential earnings headwind for S&P500 companies is underfunded pension plans which may not be reflected in the market's expectations.

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