Perception vs reality
August is historically a bad month for the markets. Adding to that is a mixed bag of economic issues which the mainstream media is not always reporting. The data is saying one thing but the markets are saying another. We hope to give you a better understanding of the market perception vs reality.
Market perception vs reality
Early July saw a really nice market rally but then it flatlined. What we were hoping to see earnings be the catalyst that would drive the markets higher. So far, 70% of corporate earnings have beat expectations. That’s very good but the market ended 2 points lower than where it started at the beginning of the week. We are seeing record day highs throughout the week but that is starting to taper off. Last week we were expecting the Fed to speak but have no impact. That happened. We expected to see good earnings. That happened. But the market did not respond favorably.
Good market news
There is good news. While large caps are consolidating, small caps are catching up for the first time in 24 months. The average stock is moving higher. The mainstream media is not reporting this.
The mixed bag
There are political and global factors that are affecting the markets and bringing a lot of uncertainty. The economic data is no different. Housing hit a 7 year high which continues to be the strong point in our economy. Consumer confidence stayed steady when we expected it to fall, but durable goods orders fell 4%. The GDP report was also disappointing. We are looking forward to a good jobs number this Friday to help keep the economy steady.
The Disappointing GDP
GDP grew only 1% in the first half of this year. This is in contrast to good corporate earnings. We attribute this to companies not investing in themselves because of the uncertainty of the presidential election and what the capital gains will be. While companies are doing well, they are not spending money to help them do better later. They are essentially on hold until after the election.
Reality will eventually win
We are watching the economic numbers across the board to see how it could impact our clients’ portfolios. We are constantly analyzing whether we should stay defensive or if we should move toward equities in the case of a market rally. While there is some good news, the markets are not reacting at the moment. In the theme of market perception vs reality, we believe that reality will eventually win.
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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