In the 1980s and through the 1990s, Marty Zweig was one of the go-to, Stock market forecasters. In the days before "blogs", we waited in anticipation for his newsletter or public interview. One of his famous sayings was, "Don't Fight the Fed". He suggested cautious stock market positioning when the U.S. Federal Reserve raises interest rates. He felt (quite rightly) that it is difficult and risky to overweight equities in these conditions.
It got me thinking about positioning when the Federal Reserve does the opposite and lowers interest rates. Another voice from the same era (Edward Yardeni) pointed out this week..."The Fed has cut rates with stocks near an all-time highs 20 times. The S&P 500 was higher a year later, 20 times. The average 12-month return was 13.9%"
Yardeni has been particularly optimistic about corporate earnings. He continues to remain very positive, as per the graph below. Higher earnings do not forecast a higher stock market in a direct correlation, but strong earnings remain a healthy backdrop.
The next few weeks are frequently a difficult time of the year for stock markets. I suspect this October to be very choppy with the very visible U.S. election.
Typically as October arrives, we begin the strong performance season. Over the past 24 years, October through December has produced an average return of 4.3%. This compares with a more typical 1%-to 2% gain for the other three quarters (Yardeni Research).
I would find Marty Zweig's updates useful in today's environment (he passed away in 2013). Looking back at his market predictions, I discovered a bonus, the non-working side of his personality.
He treasured a 1934 Packard, a gift from his wife. They hired a crane and moved the car into their 5th-floor condo, Fisher Island, Miami. The illustration below is my imagined AI view.
Strangely enough, I (independently) had the same thought process. Why not place my recently retired 1967 BMW in the living room...no crane required. It helps to have a supporting spouse!
regards, Tim
Tim Morton, CFA is a retired portfolio manager with 45 years of experience working with private clients. For the past two years, the editor of mortonir.com and a contributor to Barron's. My comments are not to be taken as investment recommendations. They are purely for discussion purposes. Please see your advisor for investment advice.
Can't you just imagine Marty Zweig behind the wheel of his yellow Packard with Ed Yardeni along for a ride past the Merrill Lynch Bull and the New York Stock Exchange!