August is known for the dog days of summer. I always thought those were summer days so devastatingly hot that even dogs would lie around on the asphalt, panting. It turns out the phrase comes from ancient Greek beliefs about a star.
August also tends to be a volatile in the financial markets.
That said, my outlook is for a continuation of the steady, synchronized expansion of the global economy that has emerged this year. The charts below, courtesy of Fidelity Investments, highlight this quite well.
(Note: The diagram above is a hypothetical illustration of the business cycle. There is not always a chronological, linear progression among the phases of the business cycle, and there have been cycles when the economy has skipped a phase or retraced an earlier one. Source: Fidelity Investments (AART), as of 6/30/17.)
This improving picture in the Business Cycle can be seen in corporate profits via the trend in Earnings Per Share (EPS) globally. You can also see that Developed International markets (DM) and Emerging Markets (EM) are accelerating at a faster pace than US.
DM: Developed Markets. EM: Emerging Markets. NTM: Next 12 months. EPS: Earnings per Share. Source: MSCI, FactSet, Fidelity Investments (AART), as of 5/31/2017.
With the US stock markets (Dow Jones Industrials, S&P 500, and Nasdaq) all at or near all-time highs, many people are wondering if stocks can keep going up or are they about to go down. The S&P 500 has not seen a 10% correction since February 2016. While 17 months seems like a long time, it is actually not even close to being the longest period without a 10% correction as the following chart shows.
So in summary, my outlook for August is that the risk of recession remains low, but economic growth may be muted by a shift toward tightening monetary policies (read: higher interest rates), which could increase volatility in the financial markets. My approach is to remain diversified and to stay focused on your long-term objectives.
As always, feel free to call me if you have any questions or concerns.
August 2016 Calendar of Events (comments and suggestions always welcome)
August the “What will be your legacy” month. Are you a good cook, do you love gardening or are you an animal lover. These are all part of your “legacy”. Take some time during August to think about and write down things you are passionate about and want to pass on to the next generation.
August 4th International Beer Day
August 8th My birthday!
August 13th International Left-Handers Day
August 14th Social Security Act signed in 1935 by Pres. Franklin D Roosevelt
August 26th National Dog Day – raise awareness of the thousands of dogs that need to be rescued. We will be celebrating Buddy & Coco, our rescues.
I hope you find this information helpful. Please share this report with anyone you feel would benefit from it.
Sources: Fidelity Investments, Raymond James & Associates, Bespoke Investment Group