The string of daily hundred-point gains and declines continues with only a few interruptions.  Volatility aside, the overall market has barely budged and are near unchanged year-to-date.  That is understandable.  After all, stock prices reflect future economic growth, profits and interest rates.  The outlook is now more unclear than it was.  And with good reason.

There is much talk (and fear) of rising interest rates.  Many think the Fed will make its first move this quarter.  I disagree.  The Fed is acutely aware of the impact a rise in rates would have on the global economy, markets everywhere and the dollar.  To raise rates they will need a very good reason, including rising inflation and heady economic growth.  Instead, the Fed has lowered its outlook for GDP growth and inflation.  The former will not reach 3 percent this year nor in 2016 or 2017.

Some see the recent weak economic reports on manufacturing, productivity, housing and trade as signs that a recession, while unlikely, is not out of the question.  Job growth is tailing off as well.  The March employment report showed new jobs were half what was expected.  Yes, bad weather and the west coast dock strike distorted results in the first quarter, so optimists see growth re-accelerating soon amid more normal conditions.  There is something to be said for each argument.

While financial commentators are predicting higher interest rates soon, the markets say otherwise.  The financial futures market is pegging a fed funds rate in 2018 that is below two percent.  More than three years from now, and two percent would still be very low and well below a “normalized” rate (approx. 4 percent).

As for equities, first-quarter profits for the S&P 500 are now expected to fall 4.9 percent and estimates for the year show token growth of 2.1 percent.

If investors had attractive alternatives, stocks would not be sporting today’s high price-earnings multiples, which are normally seen in times of rapid profit and economic growth.  But, as I’ve said for years, the alternatives are not attractive and they won’t be for the foreseeable future, especially so if the weakening economic outlook and jobs numbers further delay an interest-rate hike.  That leaves stocks and some selected fixed-income instruments.

— David Vomund is an Incline Village-based fee-only money manager.  Information is found at www.VomundInvestments.com or by calling 775-832-8555.  Clients hold the positions mentioned in this article.  Past performance does not guarantee future results.  Consult your financial advisor before purchasing any security.