Another Rainy Day on Wallstreet

Rain, rain, go away, please come back another day. Unfortunately, we have no control over Mother Nature and the chaos she can create so let’s pray that she takes a break and all of the people who have been sadly affected by her actions can get their lives back in order sooner than later.

What we do have control over though is how we interpret the headlines which h haven’t been too good over the summer. The last eight weeks have been pure h*#*# since S&P downgraded this country’s stellar AAA credit rating to AA+. It wasn’t until the August 2nd deadline that our elected officials finally dealt with a possible US credit default and the Debt Ceiling Limit, and soon thereafter Washington closed for business and everyone including the President went on vacation rather than finishing the job they were elected to do. If it sounds like I’m blaming Washington for some of the recent losses in the stock market, I am. The daily ferocious swings was more than investors deserved and it was mainly because of the lack in confidence of Governments, not only in the US but around the world, and the fact that politicians only care about getting re-elected rather than addressing the long lasting problems that plague our country. I often talk about how investors need to think like investors and not day-traders, so I guess in the game of politics, our Governmental leaders could be classified as nothing other than day-traders, coming up with short-term solutions to a long-term problem.

Investors were happy to see the 3rd Quarter come to a close, typically the 3rd quarter is the worst of the year for stocks and this the worst since 1928. The Dow tumbled -12% for the third quarter and half of that came in September, ytd the DJIA is off -6%. The S&P 500 Index lost -14% for the quarter, -7% in September and is down -10% ytd. Nasdaq was off -13% for the quarter, -6.4% in September and -9% ytd. Now for some good news, the 4th quarter has been the strongest of the year, so let’s cross our fingers.

The biggest risk facing us is whether or not we slip into a Double-Dip Recession and as long as we add jobs (even though it’s not as many as we’d like to see) and the economy grows (even if it’s a slow growth) a recession is probably not going to occur; on Friday Warren Buffet said “the chance of US recession is very, very unlikely”. What we need is for consumers to start spending again but they are more focused on cutting debt and building up savings with the threat of layoffs and stagnant income fresh on their mind(s). Consumer sentiment improved slightly in September, personal income declined and the Institute for Supply said business activity in the US Midwest grew more than expected.  With all of the headwinds, the US economy is growing and not declining, erasing signs of another recession. This Friday’s Job Report will be closely watched as we enter Earnings Season, but the news of the day is how will Greece deal with its financial crisis and what will be the ramifications for the remainder of the Euro zone and the rest of the world.