In less than three weeks, Summer will be over. The transition period between Summer and Fall is usually an exciting time for investors, as they are back from their hard earned vacation and had had time to reflect on their investment strategy. A few things are awaiting the investors.
First, the positive trends:
- After a scary dip in July, the Dow Jones Industrial Average (^DJI) has recovered and jumped to above the pre-summer levels: 17,780.82 on June 22, to 18,495 on August 10, 2016, after the dip to
17,140.24 on June 27, 2016. An increase of 4%
- Similar trend in Nasdaq Composite Index (^IXIC): 4,833.27 on June 22 to 5,226.07 on August 10, 2016 after a dip to 4594.44 on June 27,2016. An increase of 8%.
- US jobless claims continue to fall, as well as the unemployment rate
- Federal Reserve leaders, especially Janet Yellen, have been hinting at raising interest rates. Brexit appears to have dampen the momentum to raise interest rates. Experts believe that Federal Reserve will wait until December, after the US Presidential elections, to do so.
But, there are events and data pointing to potential challenges in the market:
- Brexit has fueled uncertainty in international markets.
- GDP growth remains at a luckluster pace, with 1.2% growth in Q2. Investors experts, such as Warren Buffet, have been warning investors against overreacting. They argue that this low growth rate may be due to the 2008 post crisis syndrom, with most people still too scared to take a risk.
- The oil sector continues to experience a seesaw movement of uncertainty. Oil Futures point to a potential cut in production, with the aim to boost oil prices. In fact, crude oil prices have been dropping quickly over the last months, with major oil producers refusing to cut production.
On top of all that, US are going through a rollercaoaster with presidential elections with interesting candidates on both sides and a low level of public enthusiasm.
With the mix of positive and not so positive factors, investors should brace for increased uncertainty in Q3 and Q4 2016.
© AroniSoft, LLC, 2016
Source: AroniSoft, LLC, August 12, 2016