This year has been nothing short of crazy. Think about the themes that have driven this market so far this year:
Yet, the markets are up for the year in spite of significate volatility. The punches have been thrown and we are still standing. Believe it or not, this year is actually following a pretty succinct historical script. Absent an election year, equity markets generally trend higher until the seasonally weak September/October months. However, during an election year, equity market weakness tends to occur during the summer months and subside as the November election draws near. Historically, markets then rally into year end and the market so far has followed this pattern. With this precedent we believe the markets could trade higher into year end.
The markets made a surprising move higher this past quarter, in the face of what most thought would be bad news for the global economies: Great Britain leaving the European Union (aka Brexit). In reality, investors have been comforted by the fact that the FED has decided to leave interests rates low in an effort to inject plenty of liquidity into our slow growth economy. There are several global themes we are now monitoring for the remainder of the year:
In all, we like the way the markets are reacting, in the face of some challenging global economic news. We made a big jump just after the UK vote and that move took us out of a two-year range. This is very positive technical action. It wouldn’t surprise us to see the markets go through a short-term correction. But, we believe we will see another market push higher before year-end.