Are the Summer Doldrums Over?

The summer doldrums!! Stock market strategists are great at coming up with phrases to describe situations or seasons in the markets, and I guess the phrase "summer doldrums" has been around forever.  I know it has for my 42 years.  We certainly had them last year, and this year's version has done its part to dampen investor's spirits even further - as if they needed it.  So now we have a tentative deal on raising the debt ceiling, and in many ways, it is historic as the attention from the 2008 financial crisis has turned from the necessary historic stimulus to a mood of getting the spiraling US debt under control.

The world certainly changed in 1989 when the Berlin Wall came down and the growing threat of communism took a decided step backward.  It set up that massive Peace Dividend over the next 15 years.  Inflation moved down and productivity moved up as the Technology Revolution caught fire in the mid-'90s as Microsoft and the introduction of the web browsers catapulted the Technology Revolution into the mainstream world.  Of course, trends never end when they move up to the just perfect stage and stay there - they go from ice-cold to red-hot.  That red-hot stage was visible in the Dot-com Bubble that grew in 1996-2000.  But it didn't all start in 1996.  It really started from the depths of despair in that low point in 1974.  You can see that trend in the chart of the NASDAQ Composite below.

Click to view larger image.

I recognize that your psyche is like mine, dying to be extremely pessimistic.  We've been conditioned over the last 12 years as two major bubbles have grown, captivated the world, and then burst as the hordes were clamoring to get on board.  Yet, lately my psyche has been counter-balanced by the two extremely positive inputs of the Hays Asset Allocation Model, which you can see below.


So today, there are many questions floating around...  Will this budget "deal" pass through both houses and get final approval?  Will the summer doldrums end, and a new uptrend begin that gives today's super earnings trend its deserved merit?  We don't know for sure, but our Asset Allocation Model continues to suggest that the potential for positive answers is high.

Click here to read today's full Market Comment.

Don Hays

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