As we come into the month of September there is continued reason for caution in the short term. From the high of 1,700 on the S & P 500 index on August 1st, we have seen a decline of about 4% down to 1,632 on August 30th. Trading has been listless with fewer trades even on the days where values are up.
September is the worst month historically for market performance and with all that is going on here at home and abroad, we think this trend may continue again this year. The showdown with our leadership over how to deal with Syria is deflecting time and energy away from our domestic issues of budget and debt ceiling issues that need to be addressed by October 1st. With Congress on vacation till next week, that leaves precious few days to come together with solutions. Looking back to last year as an example, we may see market volatility increase as the deadline gets closer.
Corporate America continues to make strides on the positive side with good earnings, more stock buybacks and an increasing number of mergers and acquisitions. There are a number of market pundits that feel this is a good time to buy equities due to the August decline in prices. While this may turn out to be true, we feel that this is a time to be cautious when putting new money to work. Cash and money market positions may only be earning interest below ½%, but we think that we may very well be presented with better prices in the near future to put this cash into the markets.
Notwithstanding our current cautious stance, we continue to believe that prices should be higher by the end of the year as attention re-focuses on the corporate profitability picture.
Stay patient. Sometimes the best action is no action.
We hope you enjoyed your summer and welcome you back to your jobs and or schools if you were vacationing.
As always, please feel free to contact any member of our team with questions or comments.