Slow trading volumes. Longer days, vacations and kids out of school – yep, the summer doldrums will once again hold sway over the markets. But even as the investment realm starts idling in neutral, it is likely that the following trends may develop in the next few months.
1. A Higher Dollar. The greenback’s downtrend is overdone. Let’s face it, there are plenty of problems in the world – especially in Europe, which is coping with a number of potential bailouts. The euro’s move from $1.50 to $1.20 in the last 12 months is too far, too fast. And since everyone seems to be short dollars, I expect to see a move in the other direction.
2. Stronger Munis. Someone apparently forgot to tell the states that Meredith Whitney doesn’t like ‘em. In the meantime, state revenues are a bit more robust, thanks to tax receipts from wealthy business owners cashing in on the recovery. Look for munis to continue their march higher.