Dear Sheryl,
We’re 10 days into October, and the stock market remains more than a little spooked by rising Treasury yields. The Dow and S&P 500 both plunged today, dropping 3.15% and 3.29%, respectively. At this point, I’m sure many of you are questioning whether the S&P 500 and Dow can shake off these early October scares and resume their treks higher. First, let me apologize for today’s volatility. It’s been a tough day for all of us. So to discuss the recent market action and to help set your mind at ease, I recorded a Special Market Podcast this afternoon. You can listen to today’s Special Market Podcast here. Here’s what’s happening: Normally, when there’s a flight to quality, Treasury yields decline. But that’s not what’s happening—and it’s what’s spooking a lot of people. Treasury yields are refusing to dip, as the 10-year Treasury rose to 3.225% today. That’s the highest level since May 2011. Until Treasury yields start to fall, the stock market is going to remain very nervous. Again, I apologize for the recent volatility in the stock market and our Buy List stocks. This week’ sell off is definitely due rising Treasury yields. And, personally, I think that the selling is overdone. People are reacting, rather than thinking. But, at this moment, I don’t know what’s going to ignite a reversal. It could be strong third-quarter earnings or stock buybacks. Hopefully, third-quarter earnings will help our stocks firm up. So I don’t recommend following the crowds to the exits right now. Let’s sit tight and let our stocks release third-quarter earnings. For my complete thoughts on today’s pullback and my advice for the near-term, click here to listen to our Special Market Podcast. And if you encounter any technical issues with playing the recording, please contact my customer service team, and they’d be happy to get you squared away. Sincerely, Louis Navellier
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