Market Call: The Next Surprise

So far, September isn't living up to its bad reputation for the stock market now that the S&P 500 and the DJIA are at record highs. At the start of the month, on September 2, we asked, "What Could Possibly Go Wrong?" We wrote: "We are hard pressed to find what could possibly go wrong in September. So perhaps, the path of least resistance will continue to drive stock prices higher. We are still expecting a yearend rally to 5800 on the S&P 500, but it could already be underway."

So far, the big surprise has been a positive one for the stock market: The Fed cut the federal funds rate (FFR) by 50bps rather than 25bps on September 18. On September 2, we wrote that better-than-expected economic indicators are likely to rattle bonds more than stocks. That seems to be happening. Consider the following developments: