The turmoil culminating in the month of June, creating a fairly stale second quarter result, when compared to quarter one, was aggravated by our Federal Reserve Board stating that the economic conditions were looking to be stronger than they expected.  The resulting market action was negative and confounding to me as an advisor.  I thought strong future economic conditions were good.  Well…they are but because that improvement is tied to what the Federal Reserve Board is presently doing to bolster our economy many fear that when the Fed “tapers” off its support, this will cause the economy to go back into a tail spin.  Again, another conundrum!  The Fed is not going to “taper” if that action will hurt the economy.  It is not an action set in stone but it is an action that will “taper” Fed easing and we should realize that, especially the stock market.

Many are asking, “what is creating all this weakness and volatility in the stock market”?  In my opinion it is the computer enhanced trading platforms that trade regardless of common sense.  These programs simply use mathematical algorithms to make decisions and when one variable in those mathematical equations goes awry, due to some statement or global situation, those computers go absolutely crazy in one direction without regard.

The variables that have been adding to the volatility, aside from that of the Fed, are situations that have developed in China and Japan, the continuing uncertainty in a recovering Europe and now we have heightened concerns about Egypt.  This is evidence demonstrating a strong case supporting the fact that even though the USA is the largest and strongest economy in the world, the “world” does create an impactful “cause and effect” relationship to that of our economy.

As investors it then becomes very difficult to maintain a long term focus.  It causes us to question why we maintain our status as  investors when there are so many more factors out of our control today that can negatively impact  our financial decisions and market results.  I think I have an answer and that is, “because we do live in the largest, strongest and most entrepreneurial economy in the world.”  America’s economic situation is improving.  Corporate America is stated to be the strongest it has been since the crisis of 2007/2008.  The problem is that it is a very real and true fact that the global economies such as that of China, Japan, Europe and Egypt, do create pause and hesitation to our economic and market success but only in the short term, which is where the volatility stems.  The long term is different.  These countries will solve their dilemmas, we have seen this to be true in the past and it will continue to be true going forward.  As these economies, solve their issues and/or improve, and America maintains its corporate and economic path toward improvement and growth, the long term results may reward investors that maintain a long term focus.  I would like to remind my readers that this is the mantra I chanted throughout 2007 and into 2009 where I was at that time befuddled by

what was going on and by sticking to my clients long term investment strategies and preaching that optimistically, my clients investment strategies and goals were continued and maintained progress as we entered quarter two of this year.  My the difference 90 days can make….but shouldn’t!

Let’s digress and review what   momentum forces today remain positive within our “world”.   We continue to see innovation, US auto sales   show advancement and even showed  unexpected strength in June along with reports   of potential increased global sales, interest rates remain low (although   there was a spike toward the end of June [see discussion below]), employment reports   continue to progress, consumer sentiment and manufacturing numbers continue   to show signs of improvement and housing, also continues its progress, strong   on all fronts (Yahoo Finance).

Globally the picture shows   positive reports as well.  The Euro   Zones  manufacturing numbers were   revised up in June where it showed the slowest pace of contraction since   February 2012. In Germany retail sales in May were up the most in four months   and unemployment decreased for the first time in four months.  Italy saw its business confidence numbers  increase and manufacturing in the U.K. rose to a two-year high.  Japan had an increase in industrial   production along with a positive outlook by its manufacturing sector, but  China did show a four month low in its manufacturing activity(Yahoo Finance).  While we can’t make any definite future predictions   from this, we can say that it seems the global economies and governments are   working on the issues and if they continue to do so, positive results may  follow.

All over the world there are   problems that have led to weakness of some sort or the other, however, none   of this weakness is being ignored.    Geopolitical, financial and economic issues are being focused upon,   deliberated and it appears that solutions are being formulated that are   working.  The bigger question I have is   why does it seem that all of a sudden, everyone is having problems of such   magnitude.  Is it a reverberation from   our 2007/2008 financial crisis?  Not   sure that a study has been done but it is my primary suspicion.  Taking that one step further, since we are   working on and have established recovery from our financial crisis, will our   successes filter back into the global markets?  I think so.

Now more than ever, the   complexities of investing have intensified.    The media exacerbates the news, speculates on its meaning and incites   public fear.  The computer trading   platforms move so much faster than the human platform and this use of   technology has now become a new complexity.    Political issues, such as new and potentially restrictive EPA guidelines   for the oil industry, are playing a more complex part to investment   strategies.  All of this is simply not   navigable by oneself.  I personally   utilize several “professional” sources for my knowledge, research and   investment recommendations on behalf of my clients but I continue to have to   balance that trusted information with that of the speculative information   creeping in from ever growing sources; information sources that often report   hyped-up,  inaccurate and/or   conjectured information that plays a part, right or wrong, with market   performance affecting your investments.

I continue to remain   optimistic.  At times it can be quite   frustrating but I realize that eventually the true state of the markets will   prevail and your individual investment plans will prove to be proper.  Each individual plan is specific to their   set of circumstances so I will not try to close with an overall   recommendation except to say please give me a call at any time to discuss   your specific situation.  I want to   again thank you for your referrals as I am getting the opportunity to help   guide them with different options they hadn’t considered and lead them in   directions that I know to be more appropriate.  I think the third quarter will be another   interesting one and I look forward to assessing it in October.  Until then, my best to you and your family,   enjoy the remainder of your summer and remember I stand at the ready for any   assistance you, your family or colleagues may need.