Monday, June 04, 2007

Summertime Market Coming?

It just feels like the U.S. equity market will take some time off soon. Earnings season is over and the generally good news is factored into prices. The possibility that the Fed will reduce interest rates anytime soon is fading for now, or that seems to be the drift of the market. At the same time it is unlikely that the consumer is going to break out on some spending spree with gas prices at current levels and the housing market still uncertain in most areas. Foreign markets continue to look strong but they too will take a break if the U.S. economy is seen as sluggish at the same time that the Fed is reluctant to ease on rates.

So June may bring some volatility, of course after the run-up this year, but will likely not be too exciting overall barring some important market or geopolitical news. Undervalued and undercovered mid cap and small cap stocks that are fortunate enough to be discovered and promoted by hedge funds may continue to ramp up, but they are not significant enough in the aggregate to make any meaningful difference in the overall market, just in some investors pockets. Unexpected bad news will be punished as always, but perhaps with more of a vengeance due the recent gains that have been thrown at most stocks with a reasonable pulse.

So that's a wimpy outlook, boring, but at least you didn't need to turn on CNN to hear it.


Anonymous Kenny said...

Looks more like a summer storm today.

1:43 PM  

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