Today the market again dropped with market breadth very negative. In fact, of the few hundred Exchange Traded Funds I follow, only the Dollar and Natural Gas funds were up, and then only marginally,
September is typically the weakest month of the year and most of the accounts I manage are around 30-40% in cash and bonds. What is unnerving about these last few days is that virtually ALL asset classes have come down sharply, including government bonds, gold and international issues. Over the last few years, whenever stocks took a tumble, bonds and gold tended to rally, thus giving a cushion to the selling. But this is different. ALL asset classes are dropping with few noticeable safe havens.
While I’m not an alarmist, one should keep in mind the possibility that the last few days action has been evidence of world wide selling in all asset classes and could be warning of more. If stocks drop and bonds drop simultaneously, what is left to buy, at least on a near term basis? Perhaps this sell off will only cause September to earn its reputation as the weakest month of the year and thereafter get going again. That was and still is my expectation going into September. But the selloff beginning last Friday has been different. Money is NOT flowing into the “safe assets” such as bonds and gold.
Hopefully the trendline at about 2100 S&P 500 will hold. If price breaks lower, watch the Brexit lows carefully. While I believe the Brexit lows will hold, if violated, my expectation will be for lower prices, perhaps much lower prices.
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The above comments are neither recommendations to buy or sell any security.
James Morgan Asset Management, LLC, offers fee only financial planning and money management. We do not earn a commission on any investment recommendation.
James Morgan, CFP®, JD – 303-457-9500