Weekly Commentary: Waiting for Godot (and the Fed, China and Europe)

September 4, 2012


Markets were fairly quiet last week in an end-of-summer, low volume, vacation week haze.  The Dow and the S&P 500 were down fractionally by 0.3%.  International stocks were a bit lower on continuing concerns of economic slowing in Europe and China.

The Dow Jones Industrial Average rose 0.6% in August for the third consecutive monthly gain.  The S&P 500 rose 2% for the month to close at 1406.58.  Oil prices (and gas prices) moved higher … potentially putting a cap on consumer spending.

Markets reacted positively to continuing signs of improvement in the US housing market, marginally higher 2nd quarter GDP and positive comments by the Fed.  The June Case-Shiller Home Price Index rose 0.5% versus expectations of a decline of 0.3%.  It was the first year-over-year increase since late 2010.  U.S. GDP for the 2nd quarter came in at 1.7% versus consensus expectations of 1.5%.  Lastly, Ben Bernanke and the Fed came to the rescue of the markets as they indicated a willingness to further stimulate (artificially, of course) the economy if necessary.

Europe and China are another matter.  There are definite signs of slowing in Europe and China.  Investors are anxiously awaiting the ECB’s press conference this Thursday for signs of hope.  Let’s hope that it is not more of the same – rhetoric.

We suspect that the markets will give back August’s gains as investors wake-up to the headwinds in Europe and to the geopolitical challenges in the Middle East.  Let’s not forget that September is historically the worst performing month of the year.  Buckle-up.

“Let us not waste our time in idle discourse! Let us do something, while we have the chance! It is not every day that we are needed. But at this place, at this moment of time, all mankind is us, whether we like it or not. Let us make the most of it, before it is too late!”
– Samuel Beckett, Waiting for Godot