Market sentiment turned negative this past week as the head of the Federal Reserve in the United States made cautious comments about a U.S. economy that has had its recovery slow in the second quarter. These words were contradictory to what many CEOs have been saying when they reported second quarter earnings.
After, the stock market sold off once again just as it reached the top end of its trading range â€” where the stock market has been for most of the year. Most investors use the S&P 500 as the benchmark for the North American exchanges and it has been range-bound between 1130 and 1040 for most of the year. With August historically being a vacation month for investors, I’d be surprised to see a break out of this range before Labour Day.
Many CEOs have said recently that they see their business as good but not great, with growth coming slower than investors expected. Due to that and the uncertain words coming from the Federal Reserve and Bank of Canada about growth prospects, it seems companies would rather sit on the sidelines and hold cash, instead of making investments and hiring.
Investors are growing impatient and tired of lacklustre growth. We’re going on three years since individuals have seen high points in their portfolios, with little growth in that time. But most would agree there aren’t many options for your hard-earned cash â€” fixed income products like GIC’s and bonds are still paying very little.
With this summer malaise, my recommendation would be to look beyond the Labour Day weekend for some movement and direction. Use the opportunities that may present themselves over the next two or three weeks to find positions that have had a pullback â€” that will set you up for some growth in the fall.
Sectors such as technology and financials have pulled back in the last month and may present buying opportunities for those that can handle the risk. I also recommend investors do some portfolio housecleaning to prepare for more movement.
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Allan Small is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst. The views expressed are those of the author alone, and are not necessarily those of Dundee Securities