A July Overview

There’s an old saying on Wall Street, “When things look their worst, it’s probably time for the markets to rally”.  Well, that old adage is ringing true today.  In the last six weeks, we saw the markets knee-jerk lowering on the news that Great Britain is leaving the European Union.  Things looked gloomy at that point.  However, since then the markets have rallied to new 52-week highs.  

We see a couple reasons for the market’s recent rally:

  1. The “Brexit” vote surprised most investors and the markets quickly declined.  But, this downdraft took out a lot of sellers and opened the way for higher markets.
  2. Technically the markets have been range bound for two years.  However, the markets recently hit a new all-time high and, often times, this type of technical action feeds itself.
  3. The recent spate of economic and earnings reports have come in much stronger than anticipated.  The economy is not robust, but it’s still pushing forward. 

In the end, we’ve been telling you for a while that we felt this two-year sideways market action would right itself to the upside.  The positive side of a sideways market is that it digests earnings and valuations and allows investors to rebalance.  In the short-term, the markets are a bit overbought, so it may soften.  But, we feel the longer-term markets are on good footing and we will use any softness to our favor.  

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