Investors Enter September With High Hopes

I’m sure we’re all glad to put the month of August behind us. If it wasn’t the most volatile month on record, it was right up there with the best of ’em. I wish I could say there won’t be more periods where we see such wild swings in the stock market but that would be naïve.

Investors should always look to take some profits on rallies and have cash available to take advantage of extreme lows.

This is a big week for economic data. And so far, it’s been coming in OK. ADP payrolls wasn’t a disaster. Manufacturing data was actually better than expected. And new unemployment claims declined slightly.

I’ve been adamant that it will take some kind of shock to push the U.S. economy back into recession and I stand by that. Yes, weak growth is nerve-wracking. And it’s regrettable that government deficit spending hasn’t been focused on adding jobs and making the economy healthy. In fact, that’s more than regrettable. It’s an outright failure.

When an economy goes into recession, government is the one entity that can spend to help it recover. Renewed growth should then be enough to allow the government to reverse the deficit. But that’s not what’s happened this time around.

The deficit we’ve run hasn’t helped growth or unemployment. And it’s clear that the deficit can’t be worked off this time. Either the government must cut spending or raise revenues (taxes), or both. And there isn’t the political will to do any of it. Even the Tea Party members of Congress balk at defense cuts that impact their districts.

I am interested to hear what the president has to say about his jobs bill. But I am not optimistic that anything much will come of it. The U.S. political machine is broken right now. And it is "we the people" who will suffer for it.

I’d love to sit in on a Fed meeting. I can’t recall a time when the governors were more divided on what to do. Some appear adamant that QE3 is unnecessary, a few think more stimulus is needed immediately.

One thing seems clear to me: the Fed can’t do anything about unemployment. Even though that’s part of its dual mandate, all the Fed can do is create conditions where demand could increase.

But that’s been done. Interest rates are as low as they can go. From a structural perspective, demand is as high as it can get. The only way to boost employment now is through fiscal policy. That could be a jobs bill. It could be tax holiday for the repatriation of foreign corporate profits. But the fact is, Congress and the Obama administration haven’t really tried anything radical or creative.

I’ve read that Goldman Sachs (NYSE:GS) is loading up on commodities. Goldman has reportedly added 3 million barrels of oil (via futures) and has also added industrial metals like copper. Goldman is apparently not bullish on aluminum, though. Just thought you’d like to know…

Brazil cut interest rates this morning because it’s worried about growth. That may provide some opportunity for Brazilian stocks. Jason Cimpl of TradeMaster named a few in his morning alter to TradeMaster members.

We know that investors "Sell in May and go away." We know that September is historically the worst month for stocks. So, when I see that stocks start moves lower on May 1, and sell-off in August, I can’t help but wonder if maybe investors are trying to sell ahead of these seasonal trends.

That line of thinking would suggest that this September will buck the seasonal trend and we’ll have a decent month. We’ll see…

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