Do ris­ing in­ter­est rates, mar­ket drops have your at­ten­tion?

Lodi News-Sentinel - - BUSINESS - By Tom Hud­son

If the in­ter­est rate jump over re­cent weeks didn't get the at­ten­tion of in­vestors, last week's quick col­lapse of stock prices should have — if for no other rea­son than the lack of a sim­ple, ob­vi­ous ex­pla­na­tion.

Over the course of a few trad­ing ses­sions the S&P 500 and Nas­daq stock in­dices shed more than 4 per­cent each. Sure, the bond mar­ket sell-off has been wor­ri­some, there are jit­ters over earn­ings sea­son just be­gin­ning, and the trade war in China may be tak­ing a toll. But do these well-known and ex­ist­ing con­cerns re­ally add up to a tip­ping point for in­vestors? Or the econ­omy?

Prob­a­bly not for the econ­omy. The Fed­eral Re­serve Bank of At­lanta's GDP Now gauge finds the Amer­i­can econ­omy grow­ing at more than 4 per­cent. Say what you will about the qual­ity and pay of jobs, but unem­ploy­ment is his­tor­i­cally low. Re­tail sales and man­u­fac­tur­ing data will be re­leased in the week ahead. They will be dis­sected for signs of build­ing in­fla­tion pres­sure, which has been blamed for the sell-off in the bond mar­ket.

The stock mar­ket, though, is more capri­cious and my­opic than the econ­omy. The Oc­to­ber sell-off came with the S&P 500 and Nas­daq at record highs. That's tough to re­mem­ber when the Dow Jones In­dus­trial Av­er­age flashes triple digit losses at the clos­ing bell, trade ten­sions be­tween the U.S. and China re­main on edge and Pres­i­dent Trump says the Fed­eral Re­serve has "gone crazy" by rais­ing in­ter­est rates.

In the week ahead there will be no short­age of an­swers of­fered ex­plain­ing the wan­ing risk ap­petite of in­vestors. In­vestors will vote with their money, not their voices.

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