THIS SHOW IS NOT OVER YET!

The Market ranges of the Summer doldrums often confound both bulls and bears alike. May’s market dip, initiated by continued trade tension between the U.S. and China, led some investors to believe that a more severe downturn was imminent. Yet, June’s rebound proved that hypothesis wrong.

Range Trading

Quarterly earnings reports continue to come in stable, if not stellar. And in the absence of major moves by the Federal Reserve or other impactful global events, the markets should remain range-bound for the remainder of the Summer. In our opinion, no major move to the up or downside lies on the immediate horizon for the next few months. Therefore, a steady portfolio of positions with no major reallocations might be an appropriate response to the wandering nature of the broader indices for the next several months.

The S&P 500 five year chart to the right shows how the index stayed within a range since the beginning of 2018. Some investors may become frustrated with the lack of overall growth for the past eighteen months. Especially, given that two full market corrections occurred within that time. Yet, it is important to keep the index activity in perspective. 2016 and 2017 both saw tremendous, non-stop growth. Keeping normal market behavior in mind, patterns would anticipate long-term growth needs a respite to prevent market overheating. This is precisely what we have observed from early 2018 until now.

Beyond Summer

Since the markets refrained from continuing a hyperbolic growth trend since 2018, and because indices twice took the opportunity to correct, it is our firm belief that the bull expansion which began in 2009 is not over yet and still has steam to run. While quarterly earnings and employment numbers continue to remain stable or steadily improving, we anticipate continued market growth once the Summer passes. The endless parade of negative headlines and predictions of doom for the economy do not convince us that a dire economic crisis or major recession lies ahead through the rest of 2019 or even into early 2020. Market activity for the past eighteen months proved such predictions wrong as talking heads in the media continued to press false warnings of a market collapse due to the length of the expansion since 2009.

Our assessment foresees continued growth to the end of 2019 with the possibility for some minor market volatility and a possible retest of the May market dip toward the end of Summer. Thereafter, we believe a broader market move upward will continue through the holidays. Scherschel Wealth Solutions does not make assessments with anniversaries of past major market events in mind. For example, multiple market prognosticators foresaw an economic meltdown this year simply because ten years passed since the meltdown of 2009. Rarely do market event anniversaries amount to significant trends. Rather, they merely mark a passing date for media to enable more frenzy or confusion. Scherschel Wealth Solutions prefers to rely on technical indicators to make our assessments.

The Dow Industrials, S&P 500 and Nasdaq once again reached near their all-time high at the end of June. However, the Dow Transports, Small-Cap and Mid-Cap indices lagged the major indices throughout the entire year. Before the overall markets begin another leg upward to the end of the year, we would like to see the other indices catch up a bit to the S&P 500 and Nasdaq. This would give us more confidence that market growth will sustain into the near future and next year. Meanwhile, our opinion remains to hold positions through the Summer while the market range narrows before anticipating another upward move to close the year positive.

If you seek financial advice or are uncertain about your investment portfolio, Scherschel Wealth Solutions would be pleased to offer you a complimentary analysis. Please contact Louis Scherschel to discuss further.

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