Personal Finance

Tom Hudson: The bull is back, but for how long?

The bull market for U.S. stocks may be tired but it continues roaming ahead.

In the past week, the S&P 500 reclaimed all of the price territory it lost in August and September. The index has pulled itself up from the fears of China’s summertime market meltdown and the persistent worries about when the Federal Reserve will finally begin to raise interest rates.

In the week ahead, investors will be watching to see whether the stock index will resume its romp into record territory that was interrupted this summer. And if it does, how long could the run last?

First, consider earnings. Third-quarter profits have been stronger than most expected for most companies. While profits may be higher than anticipated, they aren’t necessarily growing. In fact, S&P 500 earnings are on pace to see smaller earnings compared to a year ago. The same thing happened in the second quarter, which may have added to investor worries over the summer.

Second, consider the economy. Yes, companies continue creating new jobs, and American workers may finally be seeing pay hikes. But workers are wiser about overextending their pay checks. Lower gasoline prices help keep money in consumers’ pockets, but this year’s health insurance open enrollment season has brought higher premiums or the risk of higher fines for not being covered.

Third, where in the world is there growth? China is getting bigger, but slowing down. Brazil is mired in a recession. Low oil prices have hit the Mideast and Russia. Europe is mediocre. And the strong U.S. dollar hurts emerging markets.

In this environment, America’s uninspiring economy and investment markets retain their lure, albeit with a healthy amount of caution. That’s appropriate when faced with an aging bull.

Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.