Lindsey Report – September 2017

As of the writing of this letter, hurricane Irma has not yet made landfall on the mainland, but the prospects are grim wherever it strikes. We already know the massive and awful devastation caused by Harvey, and it appears Irma may deliver a similar blow to south Florida. I hope this letter finds you and yours safe from the effects of either storm.

Appropriately, much of our focus has been and will continue to be on the effects of Harvey and Irma. However, the domestic equity markets have moved very little in response (as measured by the S&P 500). While there was a minor sell off in the wake of Harvey, the markets quickly bounced back. We’ll see what happens with Irma.

Moreover, for the past 10 months, we have experienced a period of historically low volatility. The S&P 500 has not seen a correction (a move down) of even 3% in over 10 months. Since the formation of the S&P 500 index in 1957, there has only been one streak longer and it lasted 11 months (LPL Daily Market Research, 9/7/17). Although I never enjoy corrections, this streak is likely unsustainable and somewhat unhealthy. Markets need periods of consolidation in order to hopefully set the stage for future gains and higher highs.

It may take a catalyst to end this streak (e.g., natural disaster or a crazed dictator) or it could come from something as simple as a seasonal trend: September has been the worst month of the year for the S&P 500 since its inception (Futuresmag.com). It’s not that I am Nostradamus, predicting the next correction; rather, corrections are part of investing and they happen.

To avoid being Debbie Downer, here are some positive, economic highlights that help support the current equity valuations. The Commerce Department revised their 2nd quarter estimate of GDP (the production of the U.S. economy) to a 3% growth level! They indicated consumer spending increased 3.3% during this period. In addition, business spending on equipment increased by 8.8% and on nonresidential structures increased over 6% (CNBC). It is a healthy signal for the economy when consumers are spending and businesses are investing.

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual. To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.

 

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