The markets have stalled a bit late in the summer but, as we have been communicating for the last several months, we have been expecting a corrective phase. It’s been well over a year since the stock market went through a normal correction and stocks have looked “tired” for the last several months. As well, August and September tend to show poor seasonable performance.
Moving forward, there are two economic question marks that will determine the longevity of this economic expansion in the coming quarters and years:
Keep in mind, we have not turned bearish on the markets, we simply feel that the markets are in the process of taking a breather. In reality, the global economies are lifting right now and earnings have been strong. This is a very positive scenario and one we think will push markets higher over the coming years.
The markets have continued their run into new high territory and most major market indices have participated. In fact, the NASDAQ Composite – an index primarily known for its technology bias – has hit new highs not seen since 2000. That said, there are a couple of red flags we are seeing in the markets:
To be clear, we continue to see strength in the global economies. As mentioned previously, Europe looks to be accelerating, which is great news. But, it has been almost a year since we saw a correction and we are probably due to go through a corrective phase. That said, we also feel that any correction in this time frame will give way to higher prices by year’s end. As such, we are exploring ways to capitalize on any market weakness in this time frame.