NEWS
What Happened Last Week
The IRS announced the 2025 tax brackets, which are rising by about 2.8% apiece from 2024.
US retail sales were positive for their third month in a row, the longest streak of the year.
The International Monetary Fund (IMF) predicts that global headline inflation will be below its 20-year average by end of next year.
Investors’ feelings of optimism have cooled slightly over the last week, according to the AAII Investor Sentiment Survey and Fear and Greed Index.
How I See It
The outlook for goods manufacturing has been a bit weak since June. But good news this week from retail sales appears to support that US consumers are maintaining demand for purchasing material goods.
What that means for the stock market? Not much. The goods industry means less to the overall economy than the services industry in the US. And the services industry appears to remain in growth mode.
Remember, markets don’t need great news to continue growing.
They usually just need boring, status quo type activity.
The IMF has echoed the optimism that many investors feel, confirming a major milestone in the fight against inflation. But now that high inflation appears to be mostly behind us, they raised awareness of the threats they perceive to global growth in the years ahead: geopolitical conflict, trade wars, lower migration (or birth rate), and tightening monetary conditions.
But none of these necessarily point toward a bear market next year. These are well-known, generalized risk factors.
And stock markets move when there is a difference between expectations and reality.
So we know what potential realities might be. Now let’s look at expectations.
Expectations fell slightly this past week, as we saw optimism moderate somewhat among investors. There’s still enough doubt and caution in the minds of investors to keep the stock market healthy.
That doesn’t mean there won’t be market pullbacks or even a correction (down 10%-20%) at some point in the next twelve months. But these types of market movements happen quickly, and often for any reason, even if it’s not a good reason. They are psychologically driven more than fundamentally driven.
Signs don’t appear to be pointing toward an impending bear market, however, which is the long and deep downturn.