Stocks, Bonds, Gold All Fly Higher

Almost anything investable Thursday was much higher by the end of trading.
Stocks, Bonds, Gold - all added to morning gains after the Government reported more favorable consumer prices for October.

Inflation added 0.4% for October, while year-over-year backed down to +7.7% from the prior months +8.2%. "Core inflation" which does not include food and energy, was +6.3%, also lower than +6.6% prior. 

It's all about the direction of inflation now, and expectations going forward. As the table shows, consensus was higher than what was reported ... a win for inflation, at least this one report.

This is important because investors are handicapping when inflation will 'peak' and not go higher. That gives some confidence that interest rates may stop rising, or rise slower.
With that backdrop, investors went on a feeding frenzy, with gains of 3.7% to 7.3% Thursday in the popular benchmarks S&P 500, Dow Industrials, and Nasdaq Composite. The tote board at the close.

The widely quoted Dow added 1,201 points, or +3.7% and S&P 500 +5.5%. It was the best day since early 2020!

Bond prices rallied and interest rates fell fast in the day's trading. Investors want to lock in the recent high rates anticipating rates won't go noticably higher. When bond prices rise, interest rates fall. The 10-year US Treasury Note fell from 4.15% to 3.83%, a big one day move.

Gold, which had been stuck in the mud below $1,700 for most of October, shot up $30 and ounce Thursday, and has added $100 in the last 7 trading days to $1,745. 

Could this price action be signalling that a bottom is in for stock prices, and it's a smaller risk to own stocks and bonds now?

Perhaps, but it seldom works exactly this way, and one month of inflation data probably is not enough to convince the Fed to stop raising rates. Could the election results; where it looks like a divided Congress now have played into traders actions?
The House controls spending proposals, so maybe no more trillions of spending being dolled out will help ease inflation?

The Fed desires a +2% year-over-year inflation number, and that is miles away from this months +7.7%.

Still, stock prices are now up 11% on the S&P 500 and 17% ahead on the Dow Jones since the end of September. That's just 3,000 points lower on the Dow than the all-time high for the Dow back in January at 36,800. That's just a 9% run from here. That could be made up rather quickly, so pay attention to your portfolios.

We continue to favor the energy stocks, along with industrials and health-care, with 10-15% in Gold and 20% or so in short term bond funds and Treasury bills for our fixed income portion.

With two hurricane's criss-crossing Central Florida the past 6 weeks, I'm ready for some weather-stability. Hopefully financial markets will co-operate in the same fashion.

Thanks for reading!