Thinking about those hills on Highway 65 from Branson to Springfield, are you really breaking the law if you’re speeding downhill just to gain momentum to climb the next hill? Likewise, maybe this market is speeding downhill in early September just to gather momentum for a steady rise over the next twelve months.
The first part of September hasn’t been great for the market so far. As a matter of fact, the first two weeks of this month have been the worst of the year. There have been a few negative reports, but nothing major enough to justify investors’ fears. Whether justified or not investors are definitely acting nervous.
This may be because the Federal Reserve is expected to announce at their November meeting that they are going to start tapering their quantitative easing in December of this year. They should do that, but it could be viewed as negative and soften the market. On top of that, there has been some discussion in Washington this week about raising corporate taxes which would hurt profits. Lastly, U.S. manufacturing output data was weaker than expected, half of what Reuters projected, making some analysts feel like the economy is slowing.
All these things contributed to Action Economics, a market analysis firm, to reduce its third-quarter GDP projected growth forecast down to 5.6% from 7.0% because of “growth softening.” On the positive side, CFRA, one of the largest market research companies said though they expect some negative days short term, they project the S&P 500 to gain 7.7% over the next twelve months from 09/01/21 to 08/31/22.
Several years ago, as a teenager I was driving those hills on Highway 65 north of Branson on my way back to college. The old 1976 Monte Carlo I was driving was going way too fast down one of those big hills and a state trooper stopped me. I tried to tell him I was speeding up so I would have momentum on the next hill, but he wasn’t buying it and gave me a ticket. I probably deserved it.
We can’t get a good read on the market going forward until September is over and the normally positive fourth-quarter shows us a trend. Hopefully, the market is using this negative downturn to get momentum for the next market high.
Have a blessed week!
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