Quick recap of September’s important data points above:

70% of data points showed an increase over the prior month – led by New Home sales, JOLTS (Job openings), Consumer Confidence – while 66% of data points beat the street estimates.

The economy is clearly in recovery mode based upon historic fiscal and monetary stimulus measures. Unfortunately, we are all at the mercy of the virus in the short term. Going forward, I think looking at hospital capacity records will give us estimates to the probability of lockdowns returning in the fall/winter. I think it is a bad idea for a variety of reasons, but if hospitals are filling up, policy makers may have no choice but to implement lockdowns in those areas.

Since no one can predict this, we must focus on what is tangible. The economic data is good enough, especially given the low bar of 0% rates indefinitely.

Q3 earnings season will start soon. The forward EPS on the S&P 500 has increased to $155.97 due to the rollover.

This represents a forward PE of 21.5 and an earnings yield of 4.66%, which still looks attractive against the backdrop of a 10-year treasury bond rate of 0.75% and an investment-grade corporate bond rate of 2.31%.

The market was pushed back up into the upper end of the recent trading range on fiscal stimulus hopes. Just about everyone expected zero chance of fiscal stimulus before the elections. Those odds have increased significantly but I’ll still take the wait and see approach. I wouldn’t count on anything these days.

The Dow found support at the 50 week moving average last week.

While small caps are showing some recent strength.

The S&P 500 (red) is up 7% year to date, while US small caps (blue) are down -4.14%, and international stocks (green) are down -3.15%.

A bullish technical sign is an advance-decline line making new highs, while the averages still sit below their September highs. This means there is broad participation in the advance. Please don’t let anyone tell you this market rally is based on a few large tech stocks. Yes, a market-cap-weighted index means the largest stocks account for the majority of the market moves. But this doesn’t mean the other stocks aren’t going up to. It’s always been that way, and it will always be in the future too.