This placid market

If this equity market of late was a lake, there would hardly be a ripple in it.  There is almost no activity of any consequence in recent weeks.  It is almost unnerving.  For many years, various pundits and some legitimate analysts would talk about the summer swoon, especially in August, but more often than not, that truism did not turn out to be true.  With ubiquitous communication capabilities, the market did not stop for the beach.  If there were events of consequence, investors could jump in from anywhere.  That's an old story.  Now, this month seems to be reviving the old adage.

July was a particularly good month for equities, one that was unexpected.  That may be a reason for the mostly flat line in August.  Under the surface there appears to more going on than in the major averages as extended market indexes have shown some new strength for small cap and mid cap stocks relative to earlier in the year. Still, it is a bit of a concern to sit around waiting to see where the market is going, what sectors will break out or breakdown.  Any indications of what lies ahead are not clear at the moment, at a time when the political world in the U.S. feels as if it is edging into chaos.

Investors are staying calm at the moment.  That's good news.  There is no consensus as to what lies ahead.  There is a concern that the need for yield is stretching the price of stocks with decent dividends beyond what expected valuations would suggest.  There is a concern that the Fed is behind the curve on whatever may lie ahead, in other words that it has by default become complacent.  We are cautious but still behaving like normal investors, trade here and there, and staying the course.


Postscript 9/2 --- It continues.