The stock market has continued to fluctuate over the past several months. On September 28, it took another major downturn. Everyone wonders what the future holds for the market. The Miller Group’s CEO, Rudy R. Miller, returns to LBN for an update on economic developments and an explanation of what he sees for the months ahead in this report.
Miller says that several things occurred on the 28th to cause the drop in prices, including things that had started last week. China’s continuing economic problems had an effect on the market. Also, Carl Icahn released a video report, “Danger Ahead,” listing what he saw as problems the stock market would have to contend with. Miller says that, while he essentially agrees with Icahn’s facts, he does not believe that we are in “that bubble environment.” (Miller’s opinion is that Carl Icahn would like to serve in Donald Trump’s cabinet should Trump be elected president.)
Miller points to a number of items that had a negative affect on the market. These include a report on personal income outlays, remarks by three presidents of the Federal Reserve, the Dallas Fed Manufacturing Survey, and the pending home sales index. Miller notes that the Commerce Department reports that spending rose 4% in August, and personal income rose .3%. As for real estate sales, Miller says he still thinks the country is in a good position, although there was some discouraging news from the National Association of Realtors index. Pending home sales decreased by 1.4% in August. The Dallas Fed numbers remained negative for the ninth consecutive month. Much of that weakness is in the oil sector.
Miller says that his firm’s clients are reporting encouraging job figures. One client reports an increase in job slots that can’t be filled. Miller says his firm is seeing that employment opportunities are improving and wages are increasing, a god sign. As to China and its economic woes, Miller does not expect China to see better days until 2017. “We weren’t expecting them to have great numbers.” Another problem was that drugs and pharmaceutical stocks were down 13% the previous week. The big selloff in pharmaceuticals was related to heightened scrutiny of drug pricing.
Miller notes that all of these things came together on September 28th. Other factors include one that many people are unaware of. The Saudis have been selling off substantial portions of their large holdings in U.S. stocks. The selloff by the Saudis is related to their holding down the price of oil. The proceeds from their stock sales have been used to backstop their oil market maneuvers. Miller also says that, in his opinion, China does not affect our stock market as much as people may think. China is not a big buyer of our products and services (.06% of sales are to China).
Added to all of these things was the political drama in the House of Representatives, with John Boehner resigning as Speaker of the House. Miller opines that Boehner will work with his fellow Republicans and with Democrats to assure that the government is not shut down this year. There was also a U.N. meeting on the 28th that included Putin’s announcement of a more formalized Russian arrangement with Iran and Iraq. There is also the relationship between Syria and Russia. Added to all of the above, says Miller, were problems in the bond market where major pricing deals couldn’t be concluded. Put all of it together, and you have the stock market on the 28th.
Miller believes that the Federal Reserve has some responsibility for what happened. In Miller’s August report on LBN, he noted that the S&P Index was down 10% over the last sixty days. Miller says the Fed “made a huge mistake” by not increasing interest rates in September, as had been expected by many observers. Miller now believes that the Fed will increase rates in October. There is also a possibility to do an increase in December, but that is busy time of the year for everyone.
As to the future, Miller says he is “optimistic about the U.S. economy compared to the rest of the world.” However, says Miller, that optimism does not mean that he is a firm believer in a huge bull market. He continues to believe that things will improve going forward, and that some action by the Fed could improve things. The market may have some bumps in the future, but it is still a good time to invest. Miller points out that “you have to put your money somewhere or stay 100% in cash.” He also noted that consumer confidence was reported today as the highest since January 2015.
Rudy R. Miller is the Chairman, President, and Chief Executive Officer of The Miller Group as well as Miller Capital Corporation, an affiliated company of The Miller Group, established in 1972. He was the Founder and Chairman of the Board of Miller Capital Markets, a FINRA member investment banking firm, from 2006 through 2012. He has over 35 years of executive-level experience owning, operating and advising corporations, from large NYSE listed public companies to emerging-growth private companies. His extensive operating and advisory experience provides clients with a comprehensive understanding into the challenges of successfully navigating a business through varying economic climates. The Legal Broadcast Network is a featured network of Sequence Media Group.