August and the summer vacation period are officially gone but on a cheery note the fall is one of the prettiest times of the year with great weather beckoning us to stay outdoors and stoke up the BBQ, ride our bikes, hit the golf course or head to uncrowded beaches. It's been a while since we last checked in but we should now be back on a weekly update schedule.
August was a decent month for the stock market and the month closed on a good note with a Friday rally after Chairman Bernanke left the door open to further monetary easing during a highly anticipated speech. August finished with a gain as the S&P 500 rose almost 2% and concluded a summer rally. Since 5/31, the S&P 500 has risen 7.3% to 1406 , though it is basically flat since May 1st. So for all those that practice the go away in May theory, it was a non-event this year. More interestingly, since 1971, this is only the 8th time in 42 years that the S&P rose all three months in the summer. In each of those other years except one, the market finished the year higher at December 31 albeit not in a straight line. However, the one year it didn't was the year of the 1987 crash!
Also, even though September is the cruelest month for the stock market, during those other 8 years the market rose 6 times in September, falling only slightlythe other two times. So, if history is any guide, there is some potential for this September to be less severe or be an up month. Though it certainly could be a bumpy ride.
Having said all that, this September is one that will be full of important economic news as well as ECB and Fed meetings. Europe comes back into the spotlight this week as the ECB meets on Thursday to decide on rates and the guidelines for bond purchases. On 9/12, Germany's constitutional court meets to decide on the legality of the Eurozone rescue facilities. Here in the US, the Fed meets and reports to the markets on 9/13. So far, the ECB and the Fed have kept the markets stable through jawboning, by continuing to say the right things repeatedly. However, at some point the markets need substance over rhetoric and the coming weeks will give the central banks the opportunity to lay out their plans.
The Eurozone is especially in need of a hard plan as the markets have given them a pass since late July when ECB head Mario Draghi uttered the now oft quoted phrase of "we will do whatever it takes to preserve the Euro." If we don't get some substance soon, Europe markets will take a hit and the US is sure to follow.
Personal income increased 0.3% in July, coming in exactly as the consensus expected. Personal consumption rose 0.4%, slightly below the consensus expected gain of 0.5%. In the past year, personal income is up3.6%, while spending is up 3.3%. On the inflation front, both overallconsumption prices and the core PCE, which excludes food and energy, wereunchanged in July. Overall prices are up 1.3% in the past year while coreprices are up 1.6%.
Real GDP was revised up to 1.7% "growth" from 1.5% for the second quarter.
The best news so far this week is from the Case-Shiller index, a measure of homeprices in the 20 largest metro areas, which showed a 0.9% gain (seasonally-adjusted) in home prices in June.
The above is excerpted from the Forza Investment Advisory Weekly Newsletter. For the free, full version you can go to www.forzainvestment.com and register on the "Contact Us" page.
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Bob Centrella, CFA, is President/Managing Partner of ForzaInvestment Advisory, LLC, a Registered Investment Advisor based in Westfield, NJ. More information on Bob and Forza Investment Advisory can be obtained from www.ForzaInvestment.com. He can be reached at 908-344-9790
DISCLAIMER: The material represents the views of Bob Centrella,CFA and the information is believed to come from reliable sources. Although we have reviewed the material we can’t guarantee the accuracy and completeness of all the information. Do not rely on this information alone to make investment decisions. The information contained in this blog is not intended to constitute financial advice, and is not a recommendation or solicitation to buy, sell or hold any security. This blog is strictly informational and educational and is not to be construed as any kind of financial advice,investment advice or legal advice. We urge you to talk to a financial professional before making investment decisions for a discussion of risks involved. You can contact Forza to speak to a professional at 908-344-9790.