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This Isn’t a Stock Market Top: Searching for Alpha for August 2014

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Day after day, advisors looking for insight into the direction of the market are inundated with disparate opinion. Since bad news always outsells the good, the most daunting commentaries tend to be at the top of every webpage. That can cause some unusual investor behavior.  

Yesterday is a good example. Stocks posted their worst one-day loss since April, leaving analysts scratching their heads why and investors wondering if the bull market has ended. 

But there’s hope. Word from the Commerce Dept. that second quarter U.S. GDP rebounded strongly, continued good earnings and a benign employment report could help to quell the “call-the-top” hysteria and give the markets a short-term boost.  

Credit should also be given to a 2.3% increase in the personal expenditure consumption price index, the metric used by the Fed to measure inflation. This marks the first time in two years of a reading above the Fed’s 2% target. This may result in a further decline in the Fed’s asset purchase program (QE), which would give stocks another leg in their popularity contest with bonds. 

Don’t get me wrong. Stocks are expensive and trees don’t grow to the sky. But this doesn’t feel like a market top to me.

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