We are rapidly approaching the end of July and are well into Hurricane Season and, thankfully, we have not had any major storms so far here in Florida.  Unfortunately, a huge portion of our country has been suffering through a variety of severe weather conditions.  Let us all keep a positive attitude and perhaps say a little prayer in hopes that the current heat wave and drought will subside soon!

The investment markets continue substantial volatility.  Just looking at the past six weeks, the domestic stock market had fallen about 4% and then rebounded about 6% for a net gain since the first of June of a little over 2%.  The research that we are receiving from various analysts continues to be very mixed as far as the short-term outlook for both our domestic as well as the global stock and bond markets.  Another one of the analysis firms that we track, Trend Pointers, made the following comments in their recent market update:

For this coming period, our models are showing a modest gain for the S&P as earnings battle for center stage amidst the noise around the lack of debt ceiling resolution and on-going concerns focusing on the PIIG sovereign debt issues. The following period, which includes the debt ceiling deadline, also shows modest gains followed by a slight pullback and, at this point, neutrality going into September. Generally speaking, it appears any gains in the S&P experienced in the next two to four weeks will be temporary as our overall TrendPointers data, capturing Media Expectations around the Overall Economy, Housing/Construction and Recession/Recovery, looks quite dour with all issues remaining at historical sentiment lows.  

Domestic corporate earnings for the current quarter have begun and not only are many companies reporting better than expected earnings, many are raising estimates for this year and next.  And the earnings gains are not just coming from cost cutting, but more from top line, revenue growth.  This is important as companies can only go so far in raising earnings by cutting expenses; for long-term earnings improvement, you need growth in sales.  As an example, IBM, the second largest tech company based on revenues, saw Q2 sales year-over-year rising by the biggest percentage in three years.  If this trend continues and our politicians actually manage to resolve the current debt ceiling and budget issues pending in congress, the overall market uptrend may be able to persist for a while longer.

We remain very cautious in the management of your investment portfolio because there are still many serious problems in our economy that must be dealt with, which create a very high probability of a major correction in stock prices later this year.

If you have any questions or would just like to discuss something with me, please don’t hesitate to call.  I am always available for consultation and, as I have mentioned many times before, that also applies to your friends and family.