My 3 Stock Market Predictions for November

Just about everyone has looked like a genius in the stock market over the past year-and-a-half. Economic news and corporate earnings were generally positive, and investors were throwing money into the stock market to counteract inflation and low interest rates.

This shouldn’t be a big cause for worry, though. When ominous signs appear in the stock market, it opens the door to investors who want to buy and hold. Consider the long-term opportunities that will be available if we have a rocky November.

There are at least three predictions about the market that can be made based on what we’ve seen so far. They are:

1. Signs of fundamental weakness will drag on markets

For about a year, investors have been encouraged by signs of economic recovery and phenomenal corporate earnings. Things have looked relatively smooth for stocks, and companies across a number of sectors have been smashing estimates while growing at a record pace. That growth momentum is being challenged, and corporate profits are squeezed.

We’re seeing some early signals that business fundamentals are about to get choppier. The latest employment report showed continued high and rising weekly unemployment claims. That sounds like troubling news, but there are also historically high numbers of job openings. It also appears that a huge number of workers recently left their jobs voluntarily. High demand for labor is a sign of a healthy economy. However, we’re clearly in the midst of a major reshuffling. People are relocating, changing careers, and starting (or closing) businesses, all of this takes time to sort out. In the short term, that can have an adverse effect on consumer spending.

This quarter’s corporate earnings reports have been mostly positive, but a trend will worry some investors. Sales growth is slowing, and more companies are falling short of analyst estimates than we saw earlier this year. Even stocks that are maintaining strong sales growth are incurring higher expenses due to supply chain issues and labor shortages, which is impacting profitability. Notably, consumer stocks are among the worst performers relative to expectations, especially with cyclical and discretionary goods. That’s a bearish signal for short-term economic growth.

Don’t expect economic news and earnings to foster smooth sailing across the whole stock market in November. Some big names are going to feel turbulence.

2. Macro conditions will also weigh down the markets

Many of the capital market forces that have been driving stock market returns over the past 18 months are also drying up or…