The surprising news of the day were the results of September’s Consumer Confidence report. The index rose to 104.1, which was significantly higher than the markets’ expectations of 98.8. In addition, last month’s originally reported 101.1 was revised higher up to 108.8. An argument can be made that consumers have reached a point of being overly optimistic. Generally, down times in the US economy follow times of exceptional highs. Although this has been the conversation for years now, at some point the stock market and overall US economy will retreat. Many believe this will happen once the Fed begins to drive interest rates higher. That will create a headwind that could be strong enough to cause our markets to falter.
Last night’s Presidential Debate had minimal impact on the markets. With so much of the time spent bickering back and forth, there was little time explaining detailed plans of each of the two candidates. The outcome of the election will strongly influence the direction of both the stock and bond markets. With November’s election just around the corner, we could see increased levels of volatility as support moves back and forth from one to the other. Since the Fed is unlikely to make a move to interest rates before the next President is chosen, markets won’t be overly concerned about a rate hike until December. At that point, we could see the Fed make a move.
Bonds remain near the top of the range they were trading in for much of the summer. It remains unlikely that we will see significant improvements today. Therefore, there is minimal benefit to float in the near term.