The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Rest Up This Weekend

10/30/2010

Next week, the market could be exciting, maybe too exciting! As I’ve been predicting all year, the market will begin to rally when the election outcome comes into focus. I expected that in October and was pleasantly surprised when it started in September. Historically, the market likes gridlock, which appears to the outlook.

Another reason for the recent rally is the expectation that the Fed will announce another round of “Quantitative Easing” this week. While this is inflationary in the long term, it may jumpstart the economy in the short term. I expect the market will fall after the announcement. (There is an old market axiom about “buy on the rumor and sell on the news”.) If the Fed announces less than $500 billion, expect the sellout to be more violent.

On Friday, the Department of Labor will issue the single most important economic report of each month, i.e., the “Jobs Report”. Expectations are low, about 75-80 thousand private sector jobs. If significantly more jobs are created, expect the rally on Friday to be strong.

Only one thing is certain . . . it will be an exciting week!

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