As all of you are aware, the market has been very volatile since “topping out” following an “all time high” on January 26th and the subsequent low in early February. Since then, the market has basically gone “sideways” being trapped in a 1800/2000 point “trading range” and currently is trending downward again. The TV folks (the talking heads) tells us this is due to a plethora of issues such as, the interest rates, inflation possibilities, Italy and the latest, global tariffs.
There is a simpler way to describe these up and down market moves. The market becomes “over-bought” (meaning pricey/overvalued) and sells off. Then, when this happens, it becomes “over-sold’ (cheaper) and buying returns. Kind of like the “blue light special” seen in many retail stores.
Historically speaking, we were seasonally due for a pull-back and now we must look for support levels whereby the market could begin to move upward once again.
We believe the 24200/23800 could serve as support to allow the market to stabilize to start moving higher again. We believe the market could see much higher prices before all is said and done.
As to the possible effects of the tariffs making news, the three categories that could be most negatively affected are: Energy, Consumer Discretionary and Industrials.
Many analysts believe volatility will increase as we approach the mid-term elections later this year. We have stated many times, “the market does not like uncertainty” and we are sure to have plenty of that.
What to do at this time?
For those with a long term outlook, do nothing, for those nearing retirement or risk adverse, contact our office for specific, individual advice on your account.
For our management clients, we monitor the markets daily, minute by minute and as we have discussed, relying on income producing investments to continue to build account values while looking for short term opportunities for growth.
The economy continues to improve with GDP inching upwards, job participation rate increasing and unemployment decreasing. All good signs and is what the FED is watching ever so closely as they continue to raise rates.
We wish you a very good summer and will keep you posted to new market/economic developments.