Top 14 US Stock Market Tailwinds: Forces Pushing Stock Prices Higher
By Jeffrey Cohen, President and Founder, US Advanced Computing Infrastructure, Inc. A consultancy and investment advisory firm.
This story is a mirror image of our last story, where we spoke about forces pushing stocks lower. Of the 14 factors, most today are supporting the market’s push higher. This is an about-face, a ‘turn on a dime’ moment for factors and indicators (like a sports car) that we consider more like aircraft carriers.
Today, the US stock market is trading higher. The riskier the stock, the better. The more future-leaning, or technology-based, the better. Even MEME stocks are screaming higher today.
The main news we read was that job openings are down. That is true. Quits are down 253k jobs in July 2023 and new job openings are down 338k jobs, after a significant downward revision of June jobs data. This is considered a signal that wage inflation is slowing, which ‘allows’ the Federal Reserve Bank to stop raising interest rates.
Factors that put downward pressure on stock prices
Factors that put downward pressure on stock prices when they rise.
- Short-term interest rates: up from near zero to 5.5% in one year. Still at 52-week high.
- Long-term interest rates: up from ~2% to 4.5% in one year. Down 0.2% recently.
- Stock price variance (or the price of volatility): low, but rising recently. Down about 2% (a pretty big drop)
- US Dollar (vs. other currencies): significantly higher, especially against Asian countries. Up, then down — only up 0.3%.
- The threat of war: growing with Russia, China, Iran and North Korea.
- Government sales of debt for cash (a.k.a. Quantitative Tightening or removing liquidity): The Federal Reserve has been letting ~$100B / month of their debt mature, which removes cash from the system. In addition, the US Treasury has to refill the Treasury General Account (TGA) after the debt ceiling crisis, and is selling debt for cash in multiples of a trillion US dollars. The Total Assets of the Fed are down $60B in the past two weeks, and the TGA is up $20B, for a net decrease of $40B. This seems insignificant.