August 2012 Monthly Newsletter

Trust you enjoyed the final Holiday Weekend of the summer.  The summer flew by and my kids start school next week: Lauren is very excited and Jag (well, not-so-much).

Fortunately, for the equity markets (as measured by the S&P 500) reversed the trend of the two previous summers where the markets acted like they were on a Yo Yo string. After a sizeable pullback in the spring, the markets steadily rose from mid-June through August.  In the last three weeks of August the S&P was in a narrow range from 1400 – 1420, which is near a four-year high: very good!

The U.S. markets resiliency this summer has been impressive, given what has happened in much of the world.  As a comparison, China’s Shanghai Composite Index recently hit its lowest levels in four years.  Moreover, the European situation has not been remotely resolved, but at least the fear of their having a meltdown has abated (at least for now).

Back in the spring there were concerns the economy would hit a soft patch, which it did.  There was also some fear that it might lead to further deterioration in the economy, which fortunately did not manifest.  The “relief” may have been more of the catalyst for the markets than any data or economic report.

Recently, the Commerce Department revised upwards their reading for second quarter GDP from 1.5% growth to 1.7% growth.  That is in line with a soft patch, but also better than initially estimated and certainly not indicative of a slowdown.


I continue to believe that we need a housing rebound to drive GDP higher and reduce unemployment below its stubbornly high level.  Fortunately, there have been encouraging signs out of the housing market.  The National Association of Realtors reported that existing home sales increased 2.3% in July and sales of new homes increased by 3.6%.  When prospective buyers start believing that prices have bottomed, housing should continue to gain momentum!

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