After being closed for two days during Hurricane Sandy, the trading markets have reopened this morning to the relief of many. It is significant because end of the month rebalancing and pricing happens today and it would have been challenging for financial reporting if the markets had not reopened as they have.
Having grown up on Long Island in New York, I am aware of what hurricanes can be like and I remember the devastating nature of the tide rising significantly higher due to the storm surge and the fear and damage that occurs. In 1960, Hurricane Donna was such a storm. I’ll never forget the Coast Guard picking up my family by boat at our front door when the day before it was our driveway and street! My heart goes out to all that have to deal with Sandy and the challenges they face! Next week of course we have a national election and it looks to be a tight race! Historically, that means additional volatility for the markets. In addition, the legislature will be in a lame duck session and during presidential election years this can cause more turbulence in the markets. The Dow 30 Industrial Average touched a recent high on October 5, 2012 of 13,661 and it is currently trading at 13,078. The correction from the high is approximately 4 ¼ percent. As you know we are positive (bullish) about the future for the equity markets, but you also know we discussed the possibility of short term corrections and we are now in one. It is difficult to know how low this drop will be – just know that there will be another side to this down the road and we expect it to be a positive one. One thing is certain, the winner of this election along with Congress, will have to address a number of issues. Three budget plans from three different commissions have been presented in the last couple of years and each plan says that in order to successfully address the longer term deficit problem there are a few traditionally untouchable subjects that need to be looked at:
- Social Security
- Defense Spending
- Farm Subsidies
- Personal and corporate tax rates
- Personal and corporate tax loopholes (like deductions for paying home mortgage interest and state and local real estate tax, or making charitable contributions).
The plans did vary on the amount of revenue (via some combination of higher tax rates, fewer loopholes, and more incomes subject to taxation) relative to spending cuts needed to achieve a long term path toward fiscal stability. The outcome of next week’s elections will go a long way toward determining the ultimate mix of revenue increases and spending decreases that will set the country on that path. Have a good November and call us if you need any additional information. – Mark The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments(s) may be appropriate for you, consult your financial advisor prior to investing. “Stock investing involves risk including loss of principal. The Dow Jones Industrial Average us an unmanaged index and cannot be invested into directly. Past performance is no guarantee of future results. LPL Financial Weekly Economic Commentary dated 10/30/12.