In the Midst of It

On this fateful anniversary of the attack on our country by Al-Qaeda, we are in the middle of a digestion phase in our country’s financial markets. Company earnings have been terrific, but interest rates have been rising; we are at war in the Middle East again, and midterm elections will soon be upon us. Whether this period turns into a full-blown correction is still unknown. However, the Bull has been warning for some time now that September has often been a difficult month for the stock market.

Our bond market has taken the lead in processing all the variables just cited and has responded by demanding higher interest rates. With all the uncertainty, as an investor, wouldn’t you? If you are going to lend your money, you would want greater assurance that you will get it back and earn a fair return; higher would be better. Rates may go higher still, but we may soon be reaching a level that becomes attractive. This would be especially true if the Federal Reserve signals that it will do what is necessary to prevent higher inflation and curb the existing rate. An interest rate hike later this month would help do that.

If the bond market settles down, stocks will be fine. Remember, the fourth calendar quarter of the year has historically been a strong one for stock market returns. Unfortunately, this year, midterm elections take place in early November, so it just may take a little longer this time. In the meantime, we are in the midst of it. Be patient and stay steady my friends.