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We’re smack in the middle of earnings season, but if you’re waiting for earnings to give the market a big push — it might be time to look elsewhere. Right now, there are two bigger forces at play: the upcoming election and the Fed’s position on interest rates.
Earnings season is humming along, but honestly, it feels like an afterthought.
With so much focus on the election and the Fed, the market’s reaction to earnings reports has been muted. Next week will be the real kicker as the two big events unfold, and the outcome could have a lot to say about where we go from here.
The QQQ is Looking Strong
Let’s look at the QQQ for a second. Despite the fact that I’ve heard some folks call it “lagging”, because unlike the other two major indexes, it hasn’t hit its peak from back in July yet — the numbers tell a different story.
The QQQ is actually leading the charge this month, up 2%, while SPY is up just 1.5%. In comparison, DIA has barely moved at 0.1%, and even the small cap IWM is only up 0.7%.
So when we look at the recent gains, the QQQ is holding strong — it even took the lead compared to other indexes.
In terms of percentage gains since the August 5th bottom, QQQ is up a solid 18%, outpacing both the S&P (14%) and the Dow (9.8%).
This might come as a surprise, especially since the QQQ took the biggest hit back in July when AI stocks sold off, and it hasn’t yet regained those previous highs.
That dip in tech stocks is still a bit of a drag on the QQQ, but it’s making a solid comeback regardless.
Will the Major Indexes Hold Steady?
With the election and the Fed looming, it’s likely we’ll see the indexes in a holding pattern until there’s more clarity on what’s going on with those two big events.
A big question here is when the election will be called — there’s talk that it might take days before we know the outcome. And let’s not forget the Fed’s upcoming decision on rates, due to be announced on November 7th, two days after Election Day.
Between their hot start with a half-point rate cut in September and the mostly positive economic reports that have come in since then, the market is itching to see if the Fed’s in “rate cut mode” or not.
Between these two major events, we’re unlikely to see the indexes move much until we’re past next week. If we get a fairly quick call on the election and once we get past the Fed’s call, then maybe we’ll see a clearer direction in markets.
So, if you’re watching the market, keep an eye on these two key factors.
The earnings reports may be rolling in, but this time around, I believe it’s the election and the Fed that have the final say on where things are headed.
— Geof Smith
P.S. Meanwhile, one thing that isn’t “on hold” is Gold. It’s been on a tear with no end in sight. Here’s how I’m playing gold’s “acceleration cycles” without long term exposure to the yellow metal. | | | | |
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