Actually, we all might be going to lots of great places this summer but it appears that the market is going nowhere.
The news is continually bad and everything seems to be an overreaction. The Euro is weakening and this is bad for the USeconomy; whoops maybe it is really good, European debt worries weigh heavy on the market, and job growth is slow. And to top it off, BP had to hit the mother of all oil discoveries in the gulf and everything that could go wrong with an oil well went wrong. The president puts a moratorium on all deep water oil drilling. Because of this once accident, it is assumed that safety at all oil rigs is bad. The federal court overrules the Obama administrations ban on drilling which they will surely appeal. Reaction by the president, perhaps an overreaction, and reaction by investors is certainly an overreaction.
The market was on a steady upswing until the BP well exploded. We were expecting a correction after the first quarter earnings season but the correction is 3% to 4% more than expected. The market simply cannot find itself and it seems that it is going to remain stuck in a trading range of perhaps 1040 to 1140 on the S&P 500 for the rest of the summer. I do not believe that the market can recover until the oil well is plugged as that seems to override any other good news.
At this point, I expect the market to go perhaps nowhere for the next two months but with lots of excitement on the way to nowhere.
In next week’s blog, I will give you reasons why I believe you should remain invested.
For more information contact Richard Taylor.
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