Welcome to September, on average, the worst year on record for the market. This little factoid comes up every year as if it matters. This year, though, please consider something else. In three of the last four Septembers, the market has risen. In the one miss, it dipped in September and rose in October. So, my advice to you is do not let historical “norms” guide you in the market, nor should you panic as this September plays out.
- Focus on the longer term and ”invest through” periods of drama like the one we are about to encounter. Be long those companies you believe in for the next three to five years. If not, you’re going to get spooked out of the market and that’s bad.
Between the US political players and the Fed, September could be roiling. Of the two, however, expect the noise about QE tapering to agitate more. Again, though, don’t get spooked. See the turbulence as a buying opportunity.
- Fed policy will ultimately create buying opportunities – but the most important figures going forward will be indicators of strength or weakness in the labor market, rather than headline GDP.
The labor reality always plays a role in the market’s view of economic momentum, but it sees the relative slowness of recovery in the US labor market has not stalled the overall economic recovery in terms of GDP. Arguably, the GDP numbers are somewhat meaningless anyway, as they are backward looking and subject to revision.
- While the latest GDP figures are encouraging (and help support the Fed’s view for growth into the latter part of the year), there is little reason to believe this data will be interpreted as positive enough to generate a sustainable rally.
I agree. The GDP numbers won’t move the market appreciably, but improving global economic data will, despite Syria and the QE tapering noise.
- Upbeat factory data from around the globe powered Asian markets on Tuesday, while gold and the yen lost some of their safe-haven appeal as the U.S. delayed a possible strike on Syria.
China and the US are turning in improving economic numbers. It appears, despite the headline news about the market reacting to Syria, the market likes the data that just came out.
- Demand picked up in the U.S. manufacturing sector in August, data showed on Tuesday, which together with a report showing steady growth in China’s services sector added to signs of strength in the world’s two biggest economies.
- The Institute for Supply Management’s August manufacturing index came in at 55.7, above expectations for a reading of 54. July construction spending rose 0.6 percent, twice the rate that had been expected.
- China’s services sector grew steadily in August as domestic demand picked up, adding to signs that government measures have started to steer the world’s second-largest economy out of its longest slowdown.
- Factory activity in the euro zone rose at its fastest pace in more than two years, and even manufacturing in struggling Spain grew for the first time since April 2011.
The last bullet point, the one about Europe, is not headline news, but my guess is the data is playing a far greater role in the money moving today than the news suggests. China, the US, and, yes, the forgotten child Japan, are the big-three country players on the world economic stage, but the EU has the largest conglomerated economy on the planet. As it begins to move sluggishly forward, the consumer market there will have a tremendous bearing on global economic growth.
Going back to the issue of employment vs. GDP as an important indicator for the market …
Any European economic improvement will affect US employment (Europe employment as well), as Europe is a huge trading partner for the US. It is simple – more demand, more production, more jobs. As this unfolds in the nearer and longer term, US employment will displace Syria, QE tapering, the political buffoonery of the US Congress, and whatever other hyped-up news comes along. Never forget, in the end, the market loves corporate profit, and that will come as all the other economic stuff unfolds. Oh, and the US GDP will grow as well.
Trade in the day; Invest in your life …
