What better way to celebrate the acceptance of Fed policy than having the Nasdaq close at a new all-time high, with the S&P following close behind it? The fact is -- and this is why stocks have been in full rally mode since the meeting -- that lower rates combined with rising earnings are an absolute tailwind for stocks, if for no other reason than the low-rate scenario making equities the most attractive asset class.
The Fed has now given a market in which companies were already making money an ample boost by promising to keep rates low. Could this be setting the market up for a large fall in the future? Possibly, but as we saw back on Sept. 9 when stocks sold off sharply that Friday from rate hike fears, markets bounce back.
It would be naïve to think that markets will rise indefinitely and that all dips must be bought, but for the time being we really have a green light on this bull market. At some point, the tide will turn and we will have to exercise caution on dips, but we aren't there yet.
Supporting this market was another week of very low readings for weekly unemployment claims , which came in at 252,000. To put how low the 252,000 print is in context, we have to go all the way back to Sept. 30,1972 to get a lower reading.
Another way to look at claims data is through a relationship that I've highlighted in this space before, the one between claims data and job openings as presented in JOLTS data.
Given that job openings are resting at an all-time high, we can see why claims have continued to drift lower. It'll be very interesting to see what the August JOLTS data say, which will be released on Oct. 12. All this said, we could certainly see claims drift down below the 250,000 level, as the labor market continues to tighten.
Another part of the economy that continues show strength is housing. Thursday saw existing home sales for August come in slightly down for the month, while prices rose and are 5.1% higher than they were a year ago. The main takeaway from the EHS report was that the combination of low inventory and high prices are having a severe impact on transaction volume.
Then backing up the price gains seen in EHS data were gains in the FHFA House Price Index, which was up 0.5% for August and is sitting at its all-time high. All these data points coupled with the commentary that we got from the CEO of Toll Brothers (TOL) on Mad Money, who said business was strong and that land shortages were delaying new projects, are showing us that we have a strong and sustainable housing market.
The next big event for markets will actually be the presidential debate on Monday night, where we may get some clarity on a winner in this very close race. The best case for markets would be a clear winner before the election, so that we can mitigate any election volatility. Bottom line is, regardless of who wins the election, low rates will be with us for a while and as long as company earnings do well in October, November will be just another dip to buy.