Will it be a September to remember? Some thoughts
In the August 2009 Blue Chip Financial Indicators Survey, 39 out of 46 participants expect a rate hike by the end of 2010. If I had been surveyed, it would have been 39 out of 47. I can't see a rate hike ahead of 2010 elections and with a continued troubling unemployment picture.
- The Financial sector continues to perform well. The fundamentals of the sector are an ongoing battle between a favorable yield curve and a continued weak credit environment. The overall market will falter, should the weak credit environment begin to weigh down the Financials sector. So far, so good.
- The outstanding performance of the Technology sector is buoyed by a weak US currency, rising orders for computer hardware and a PC upgrade cycle that will be powered by corporate budgets needing to improve productivity. Overall, an extremely positive fundamental scenario in a world void of extremely positive fundamentals.
- Emerging markets looking south. Please resist any urge to value invest on the teetering Mexican economy. That economy is heavily reliant on Oil revenue and has been unable to navigate its way through the Oil plunge earlier this year. In addition, the government is raising taxes and cutting spending. Don't catch this falling knife.
- If I am correct that 2009 = 2003, we are half way through the bull recovery from early March. Markets love anniversaries; a recovery top could line up somewhere in early to mid March 2010.
- Keep buying corporate bonds - conditions continue to improve each week and default rate negativity continues to ease. Corporate balance sheets are in better condition than previously thought.
- Commodity inventory excesses will continue to decline. I continue to view the space as overly attractive.
- Lehman Bros. anniversary this month, with lots of CNBC coverage of the event. For me, plain and simple, it was a colossal mistake to let them fail.
- I would be a buyer of volatility over the next few weeks / months.
- I expect a currency shakeout this Fall - a cyclical shakeout, not a long term change in trend. The dollar could rise, commodity currencies may fall.