It used to be those late summer days of trading were so slow that it felt like the market was in a food coma following that big Thanksgiving meal. The early summer rallies would give way to lethargic action because not only are there no holidays in August here in the US but political wranglings ‘usually’ die down. The perception for this year is no different, grinding through the day watching the clock for quitting time, taking off early because there is no risk of missing anything actionable. I would disagree, there has been plenty to trade on if you had your eyes and ears open.
Haven’t we seen energy come back to life after a death drop? Some technology stocks are at/near all time highs while the banks are just getting in gear. Select retail names have been strong including Walmart, Target, Urban Outfitters and American Eagle. The industrials are also holding in strong while transports also show an uptick in business.
Let’s take a gander at Apple, which has put in a stellar performance in August. The behemoth has ‘quietly’ been up to all time highs this month, moving higher by more than 10%, even better than that from post earnings. They have added more than 60 billion in market cap in that time! And trading Apple? Some of the biggest gains were seen during this most recent expiration week. The great thing about Apple is it attracts buyers to other stocks as well. If Apple is moving then others are safe to buy, too – at least that is the perception, which in most cases is reality.
News flow has been rather strong this month, easing the worries of market players with far less uncertainty and speculation. The euro zone now seems to ‘get it’, perhaps the bold words of ECB Chair Mario Draghi will see follow-through. The Fed here in the US is ready to use whatever means necessary to spur growth, hiring and battle any deflationary trends. The economic data has not been all that bad, industrial production is higher, durable goods are up and manufacturing is strong, while the housing market is on fire.
We aren’t necessarily seeing the explosion in home values from the last decade (yet) rather new homes being built and sold rapidly, multiple offers on units and lending from the banks as they loosen the purse strings. All of this probably wouldn’t be happening if there were no light at the end of the economic tunnel. Full steam ahead? Not quite.
Perhaps leaning too hard on China to anchor global growth is the wrong approach. As they have taken their place as a leader we cannot forget that much like the US and Japan their economic engine has become quite large, that being said it takes time to stimulate or cool down. The prior 8-10 years this country has grown at a startling high clip and now they risk overheating. Taking a more gradual approach gives China a better chance at a soft landing. The housing bubble, stockpiling of goods we hear/read about are nothing new to a growing economy but certainly needs to be worked off.