A July Overview

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:

  1. We are entering into a seasonable unfavorable period for the markets.  Most people believe October is the worst month for the markets because of the 1987 meltdown.  But, September has actually been the month that the markets have performed their worst.  
  2. The internals of the market have started to erode.  As the markets have hit new highs, we have found fewer and fewer stocks in the indices pushing the markets.  This typically will not last very long before the markets correct.
  3. Most indices are extended from their longer-term moving averages.  Most markets will either come back to their moving averages, or move sideways for a period of time when we see this happen.

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.  

A June Overview

The markets have been running up recently, primarily on the back of strong performance from the technology sector.  The summer months tend to experience lower levels of trading, so we would expect a bit more volatility during these months.  But, there are a few trends we are seeing that define the markets move up:

  1. We are finally getting economic growth from the rest of the world.  For the last eight years, it has been the US, and everybody else.  Our economy has pulled the global economy higher.  However, in 2017, we’re starting to see much better growth coming from places like Japan, Germany, Spain and even the UK.  If these countries continue to participate, we have a chance for a sustained market run.
  2. Rates are still rising.  The FED raised rates for the second time recently and we expect one more hike before year end.  Typically, rising rates curb economic growth.  However, since we’re starting from such a low level, it will be a long time before the level of rates dents our economic growth.

As mentioned, we would expect the markets to level off and even potentially correct in the next couple months.  But, we also feel that any correction in this time frame will give way to higher prices by year end.  As such, we’re exploring ways to capitalize on any market weakness in this time frame.  

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