August 9, 2016
Well, the good news is that the three major US Equity Indices (Dow Jones, Nasdaq and S&P 500) are solidly in positive territory year to date, as of 08/19/16.
Of course, we got here through many dramatic swings accompanied by many over dramatized events. The most recent event was Brexit – and to listen to the talking heads, the global economy was surely heading into a tailspin. The uncertainty that the UK exit created was not to be taken lightly, but o nce cooler heads prevailed the outcome was far less dire. It will be years before the post-Brexit rules are finalized and that may cause some trepidation for UK businesses. According to Bloomberg news, it appears that the UK may be heading for a recession. Fortunately, it doesn’t look like it will spread to the rest of the European Union, which is regaining its economic footing on most every level. And isn’t the Federal Reserve keeping us guessing – to raise or not to raise? Thus far, the moderate governors, including Chair Janet Yellen, have taken a “wait and see” approach and are closely watching inflationary factors and continue to wait until inflation floats closer to 2%. It looks like rates will likely be raised before year end, but most indications point to the December Fed meeting rather than September’s.
When interest rates do finally rise, it should be at a slow and controlled pace and such a rise seems to already be built into the bond market.
Now that the strong post-Brexit equity rally has stabilized, the US Equity Markets continue to trade sideways with a slight trend upwards. Of course, this brings on the debate of bull vs bear. I am cautiously in the bull camp for several reasons. Retail sales are up, inventories are declining, manufacturing should increase, corporate earnings are up and oil prices have stabilized – to name a few. I say “cautiously” because many global central banks are running out of stimulative options, this bizarre election cycle still has two months left and geopolitical tensions are high. In my opinion, there are more positives than negatives for the Equity markets for the remainder of 2016.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.