An August Overview

The markets have rallied strongly since the Brexit vote was finalized, a move that was counterintuitive to most investors.  In reality, markets typically rally when investors do not expect it and bear markets appear when everyone is apathetic.  So, it wasn’t surprising to see the markets rally in the face of this year’s volatility.

There are a couple things we feel are driving this rally:

  1. The last round of earnings announcements was much stronger than most investors expected.  Stocks were selling off because analysts were ratcheting down earnings estimates.  So, the bar was pretty low for companies to beat.  However, the numbers were particularly impressive in the second quarter.
  2. The global economies are not as bad as many had feared.  It appears China has stabilized and Great Britain, of Brexit fame, just produced one of their strongest GDP reports in ten years.  
  3. There is a definite bias in the asset allocation world toward stocks and away from bonds.  The FED looks like they are poised to raise rates at least one more time this year and that has sent traditional bond investors looking for other places to invest.  

The markets look a bit tired in the short-term, as they have rallied strongly over the past couple months. We wouldn’t be surprised to see investors take a short-term break.  However, we feel that any pullback in this time frame would lead to higher prices down the road.  We are currently analyzing markets and sectors to discern where we might deploy more capital. 

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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As your investment professional, we are committed to delivering performance in a manner that is consistent with your needs, goals and desires. Headquartered in Orlando Florida, Delta Advisory Group serves clients throughout the United States.