A Mid-Summer Night's Prognostication

It’s time for a little crystal ball-gazing.

As I ready for a round-the-world, 17-day jaunt with my oldest son, Troy (he’s a 17-year-old high school student making a documentary on genocide), several clients have asked me for my opinion of the markets.

First off, I expect to see a bit more red for stocks. The downtrend has been quite orderly so far – as witnessed by still-tepid readings on the VIX – and there has been little technical damage to the indices at this point. We could likely test the lows from March, and even breach them, but I don’t foresee much pressure from that point.

The reason is still-strong fundamentals. Although GDP will be revised downward, it will still be positive (hence, no double-dip recession). Stock market valuations are still reasonable, as the P/E ratio of the S&P 500 is around 13.2, comfortably below the five-year average of 14.9 and the 10-year average of 16.7, according to CRB Futures Market Service. Equities may not be flashing a rapid “buy” signal, but they certainly are not a raging “sell.” Well-diversified investors should weather the summer doldrums quite well.

We are certainly facing significant headwinds domestically. Rising energy prices, high unemployment, and a stubbornly weak housing market are acting as anchors on the current recovery. But we are still in a recovery, and that should keep market volatility somewhat dampened in the next three weeks.

I am grateful for the opportunity to travel with my son this summer, and will be back in the office on June 28 with (hopefully) a fresh perspective on life and the markets, and a renewed sense of thankfulness for all we have in this great country. I will attempt to blog during my absence, but no guarantees!

Reprints Discuss this story
We welcome your thoughts. Please allow time for your contribution to be approved and posted. Thank you.

Most Recent Videos

Video Library ››