Let’s begin this Thursday with a quick, “Don’t freak out about the market.” A quick look at the market happenings for the last four summers and then remembering what followed in the ensuing autumn should tell you why. In fact, it is still August and you all should be on vacation having a good time. But, in case you are not, and you are worried about the market tanking, here is more data that suggests a repeat of the last four year ends will happen this year.
- The four-week moving average for claims fell to its lowest level since November 2007, suggesting the economy was growing enough to fuel steady improvement in the labor market.
- U.S. manufacturing activity hit a five-month high in August.
- New factory orders hit a seven-month high and firms took on new workers at their fastest pace in four months.
- Eurozone flash manufacturing PMI has increased to a 26-month high of 51.3 in August from 50.3 in July and exceeded consensus of 50.8. Services also showed expansion, as did the composite figure.
- HSBC’s Chinese flash manufacturing PMI has surprisingly indicated expansion for the first time in four months in August, providing further evidence of stabilization in the economy. The figure has increased to 50.1 from 47.7 in July and easily topped consensus of 48.3.
Yesterday, I made an argument that the US consumer remains healthy and oil prices appear headed downward, which will make the consumer even healthier. The above suggests I am correct about the US consumer, as well as the global consumer I might add. As to oil prices …
Although oil prices ticked up fractionally today from the positive global economic data, I don’t expect that will last long, especially if the Fed begins QE tapering next month. As well, the other reasons I stated yesterday are still in play. Summing those reasons up – demand will lessen next month and supply will not. Today, however, I came across some information that could dramatically affect oil prices beyond even what I suspect.
- Iran wants to boost oil production by 70% in an effort to retake its place as OPEC’s second-largest producer and is willing to start an oil price war to win back market share lost through sanctions.
Now, Iran has some technical issues to overcome if it is to regain its number two position in OPEC, but if it provides economic incentives, international oil companies will help it resolve those issues. The help it needs will come a calling if the new regime in Iran finds a way to resolve its atomic energy problems with the world and economic sanctions end. The noise out of Iran is that the new regime wants a resolution. If Iran can find a way to get this done, we should expect a buildup and pump out in the near future and this will push oil prices back down to reasonable levels. This will give impetus to the global consumer and the market will like that, a lot …
- Nokia plans to unveil new, large-screen mobile handsets next month to revamp its Lumia smartphone lineup and challenge rival Samsung’s dominance in increasingly popular phablet devices.
The above is to remind you that as the economies around the world improve, technology will take a position front and center in the market. Just as Iran promises an oil price war, technology promises a continuing battle for market share, and the way technology companies go after market share is with innovation.
So, keep your powder dry while vacation, because you will need it when the summer ends. Now, if you are back from vacation, or you never left, consider the remainder of August a buying opportunity. Then again, you might want to wait until September has passed.
- Republican lawmakers, who staunchly oppose President Barack Obama’s signature healthcare law, are considering using a fall showdown over the country’s borrowing limit as leverage to try to delay the law’s implementation.
My thought is that the upcoming noise will be strictly about impressing constituencies, and it will end without damage to the market, but one never knows for sure with the bombastic and ideological politicians in Washington D.C. As always, we will see …
Trade in the day; Invest in your life …
