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.

(See my last blog on AdvisorOne for more on the dollar and stocks, and a prior blog posting on why it may (almost) be time to buy the dollar.)

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.

(See an AdvisorOne article on the MSRB and transparency in municial bonds, and another article from this week on the rally in the muni bond market.)

3.       Lack of a QE2 apocalypse. The end of quantitative easing is being priced in as we speak. There may not be a rally, but don’t expect a sell-off, either.

(See an AdvisorOne article on some money managers who are pretty sanguine about the end of QE2.)

I’ll be on a European roadshow next week, and will post if time permits.