My favorite professor at Wharton was undoubtedly Dr. Jeremy Siegel.  Although he has the demeanor of the stereotypical absent-minded professor, he has a laser-sharp mind, capable of piercing tall mountains of data.  However, he has never seen a glass as half-empty . . . only half-full.  His landmark book, Stocks For The Long Run, is required reading.

In addition to the headline above, he reminds us that 73% of companies have beat their earnings expectation this quarter, and 56% have beat their revenue expectations, which is great.  So, corporate America is strong!

He points out that the labor market improved last month better than we realize.  The non-farm payroll report or “Jobs Report” showed only 163 thousand jobs were created.  This estimate is based on reports filed by businesses.  However, the Household Jobs Report, which is based on random phone calls to homes, shows a much stronger 227 thousand jobs were created.  Plus, the unemployment rate did tick down to 7.5%.  So, America’s labor market is certainly improving.

But, does this mean the Fed will begin reducing Quantitative Easing in September?  Dr. Siegel gives that a 75% probability.  At first blush, that would be a clear signal the stock market will fall.  But, maybe not!

Some people see the current sideways drift in the stock market to be the prelude to a bear market.  Some see it as typical of the “dog-days” of August, when trading volume is very low.  More people see it as a “consolidation” of market gains, which is necessary to begin the next leg of the bull market.  However, it could be that the market is already factoring-in the news that QE will begin slowing down next month.  In that case, there will be minimal reaction to the news.  While Dr. Siegel didn’t opine on this point, I really doubt that he would disagree.  After all, the glass is half-full, isn’t it?