So, what is causing all of the recent wild swings and historical high volatility in the marketplace? If we had to list them in order, we would say the media, brokerage firm market makers, and then the deficit.
We think all will agree that the media has literally become the single most fear-mongering media in American history. In an age where there's so much transparency in the world, they have made it their focus to exacerbate anything and everything to get viewership and ratings. With that being said, many Americans and investors are beginning to turn a deaf ear to all the baloney currently being spouted.
In the past, brokerage firms/platforms have relied solely on commissions but they have since changed their strategies. They are now making their money via volatility.
At the moment, it's all about whether or not Congress is going to raise the debt ceiling, which comes at a time when many Americans are extremely concerned about the future of the US deficit. It's an underlying conundrum of sorts for the markets and investors, as one side says we can't afford a much larger deficit, while the other side says it's not a big deal “until it becomes a big deal.”
We don't think there's any chance that the debt ceiling won't be raised. For sure, we could see a lot of political drama unfold. We could even see further delays, which would likely trigger even more market-wide volatility. More so than what we've seen all year, but remember, Wall Street loves to climb a wall of worry.
That all aside, we believe it's all going to come down to economic growth. Bottom line, we could end up seeing massive economic growth with the projection and expansion of things like green energy, space, infrastructure, and the Internet of Things (IoT). Perhaps so much so that when we look back 20 years from now we might see the same tremendous growth we saw 20 years ago.
Given the distinct possibility of extreme volatility for the near-term landscape, we continue to maintain a “goodly” amount of cash in client accounts until a firm direction is clear. This approach serves two purposes, capital preservation, and capital availability when opportunities present themselves. We will continue investing in a professional, conservative manner and will not allow personal or political opinions to affect our decision-making.
Along with the current political drama, third-quarter earnings season will begin shortly and we will be monitoring closely for signs of market direction as well as possible buying opportunities.