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The “Heat Map”

January 28, 2015 | Weekly Commentary

Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade is an A (very favorable) due to the favorable effect of lower gasoline and heating oil prices.

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

BUSINESS PROFITABILITY: This factor’s grade has been decreased to B- (slightly above average) from B+ as the effect of a stronger dollar is felt in corporate profits.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We have added the heightened risk of turmoil in Europe from the recent Greek election. The Greeks, with help from Russia, may take a hard line against paying back the huge bail-out loans with which Greece is saddled. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 3, an increase from level 2. These risks deserve our ongoing attention.

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