Decent economic data, a slew of positive quarterly earnings reports, stable Federal Reserve policy and a relatively upbeat jobs report were overshadowed by geopolitical events around the globe, Argentina’s default and a Portuguese bank’s problems, as stocks resumed their selloff on the first day of trading in August. The S&P 500 and Dow Jones Industrial Average both achieved highs early in July, but those gains were erased by the end of the month, curtailing their year-to-date progress as well. By 1 p.m. EDT on the first day of August, all three indices were down at least 0.6% from the previous close.
Chief Investment Strategist Jeff Saut recently wrote he’s “cautious on a near-term trading basis, even though I believe we are in a secular bull market that has years left to run.” His commentary also noted that the broad-market S&P 500 has gone more than 1,000 days without a 10% drop (the third longest stretch in the past quarter century), which could be sign that we’ve reached a temporary top more than five years into what he considers the first leg of a 12- to 15-year bull market.
“If one studies the history of the beginning stages of secular bull markets, they tend to have upside-trouble at the 64/65 month stage of the rally,” he explained.
Although there’s no consensus about what caused the drop (a number of factors were at play), the end-of-month decline didn’t come as much of a surprise to Chief Economist Scott Brown. “The stock market was likely [already] poised for a correction,” he wrote. “But there was certainly a long list of potential catalysts for the steep decline.”
Stocks continued to fluctuate Friday morning, after the Labor Department reported that employers added 209,000 jobs in July (the sixth straight month of 200,000+ increases) and the Institute of Supply Management announced that manufacturing had expanded at its fastest pace in three years. While the Labor report showed some strength, it still fell short of economists’ forecasts and the jobless rate edged slightly higher.
I’m sending you this update in case the latest market news caught your eye. While I believe investors should pay attention to market activity, short-term declines like the ones we’ve seen in recent days shouldn’t distract you from focusing on the long-term success of your financial plan. If you’d like to discuss recent market events or have any questions about how they may impact you, please call me. I look forward to speaking with you.
Ian Kiefer, CFP®
Investing involves risk, and investors may incur a profit or a loss. Past performance is not an indication of future results. Investors cannot invest directly in an index. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The performance mentioned does not include transaction costs which would reduce an investor’s return.