Why is the Stock Market Pouting?

Why is the Stock Market Pouting?

That’s all this is. The recent spike in volatility and violent stock market moves are simply the infant side of the market coming out and pouting over the lack of progress in the U.S. and China trade talks. It does this on occasion and although painful (in the short term) is nothing to be alarmed about.

The stock market has a long history of making its voice heard when it disagrees with something, usually a political event affecting the domestic or global finances. The recent spate of aggressive swings is just par for the course. Its screaming at President Trump to end this tit-for-tat tizzy fit with China.

Obviously, I understand the nervousness. Who doesn’t feel that pang of anxiety when the stock market spikes downward?

Yes, sometimes it is a warning sign of some impending doom. However, most of the time its just a needed correction in search of a catalyst (i.e. the trade deal).

For the most part, things are good. Very good. So, I see this as a short-term summer correction. This is not uncommon in August when all the traders spend the month in the Hamptons.

Let’s look at the current backdrop:

1. Earnings season is over, and earnings were exceptional. This shows the strength of corporate America which drives stock prices over the long term. So therefore…
2. We are in the Post- Earnings Nap period when all the financial news is out and only the headlines are left in the headlines…and headlines are never pretty!
3. The U.S. economy is very strong and showing no signs of rolling over. Just look around at all the construction. That’s a good sign.
4. Corrections come when people least expect them when optimism is high, like last week when earnings exceeded estimates. This helps get rid of the excesses as inexperienced investors “panic sell” and sell low and buy high!

For now, if the market is affecting your summer mood, head to the beach and watch the waves. This show isn’t worth your time nor the headache. This appears like nothing more than a summertime correction. Patient investors will be rewarded.

Of course, if something dangerous were to surface that would put your financial plan in jeopardy, make no mistake, we will act decisively. That is what we do for our clients every day.

Rest assured, I have no problem selling or even going to cash if the situation warrants….and right now we are no where close to that. Just a political tizzy fit to deal with.

If you have any comments or questions, do not hesitate to contact me.

Cheers -Keith

Smart Money Newsletter

Written By: Keith Springer

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