Despite a swarm of bad news (higher inflation, interest rates, election uncertainty, unending wars) the stock indices remain higher for the year. The “Dow” is up 6.4%, and the more representative S & P 500 Stock Index is up 11.90%. Why?
Corporate profits are improving at a much faster pace than anticipated. Interest rates, while inching up, as we predicted in our third quarter report, are still relatively low historically. Spending on Artificial Intelligence (AI) related projects, e.g., data centers, power generation, is soaring. Continued high government spending, and high investor money market balances are catalysts to push a lot of money into the economy. Investors typically look ahead 6-9 months and, rightly or wrongly, they believe the economic and geo-political scenario will improve. We continue to believe a higher-than-normal cash (money market) position is appropriate for most investors, given the continued stock volatility.
The recent weakness in the technology and banking sector has created some opportunities. The valuations of some large companies now sport valuations (price to earnings ratios) that approximate the average stock. But these stocks are above average in quality: IBM (IBM, $221), Salesforce (CRM, $225), Microsoft (MSFT, $508) and Alphabet (GOOGL, $345) could be bought for future growth. Alphabet also has a preferred stock whose dividend yield is over 5% and converts into common stock in three years.
Two bank stocks we have favored continue to do well, but have retreated over 10% from their highs. Columbia Bank (COLB, $29) and Truist (TFC, $46.5) trade near book (break-up) value and yield 5.17% and 4.50% respectively. Insurance and money manager Prudential (PRU, $114) also looks attractive, yielding 4.90% and trading 25% below its book value.
Please contact one of our friendly advisors for a free portfolio check-up or more information about the above stocks. Our portfolio management service continues to expand. Contact Bob Mann for more information.
Prices and yields as of September 30, 2026. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her needs. Stock investing is risky, and you could lose money. The author and/or his clients maintain positions in all of the above-mentioned securities. First Georgetown Securities, Inc. will provide available information supporting the above recommendations on request.