Mixed Signals

Whether or not the Fed will start tapering the pace of its asset purchases seems to be the big question hanging over the market. This week stocks moved modestly higher as the negative implications of a disappointing employment report were outweighed by heightened expectations of economic recovery.

On the plus side, key manufacturing and services sector data were pleasantly surprising and auto sales remained robust. Corporate merger and acquisition activity was also in the news, indicating corporate confidence may be on the rise.

On the other hand, the potential for U.S. military action in Syria continues to be a concern. At the same time, U.S. non-farm payrolls for August were slightly below expectations. More worrisome, however, were the downward revisions to the June and July payroll figures.

Looking forward, debt-ceiling debates and the ongoing impact of sequestration remain on the radar screen. Against this backdrop, the market has increased at a faster pace than both revenue and earnings.

At BWFA, we remain focused on finding the best stocks. We believe it’s a stock picker’s market, and we’re finding more stocks that appear fairly priced or overvalued than look undervalued. We continue to be patient and are focused on finding equities we believe have the potential for long-term appreciation for client portfolios. As for the Fed, we think at least moderate tapering remains possible, but the Fed’s near-term actions are unlikely to materially impact our long-term bullish market outlook.