Hope you are all doing well, and that Hurricane Ida did not impact you too negatively. Markets were mixed for the week, as the Dow lost 0.2%, while the S&P 500 rose 0.6%, and the Nasdaq Composite increased 1.6%. This week, I thought I would take a chance to answer some frequently asked questions.
Is the Delta Variant going to derail the recovery?
The August employment report released on Friday was not great but it’s a normal bump in the road in a continued recovery. Monthly job gains totaled 235,000. Expectations were much higher. Stalling job growth is attributable to new pandemic restrictions. It’s clear that the sugar high from the stimulus checks and the re-opening of the economy is wearing off. Even without the extra stimulus the economy should experience above average growth. We have seen a surge in both productivity and profitability. The shift to working from home will continue to have a huge impact on corporate profitability. Companies must incur far less in expenses to make the same and in many cases more revenue. The economic expansion still has ample runway ahead.
Should I sell my home?
The home market is starting to cool. You may be about to miss your opportunity as supply is starting to catch up to demand. Signed contracts to purchase previously owned homes fell 1.8% in July from June, according to the National Association of Realtors. The median price of an existing home was up 18% in July, but that does not tell the story. The number is deceiving because there was far more activity on the higher end of the market, which skewed that median home price higher. Pending sales tells us much more about where prices are headed. The pending sales index (homes that will close in the next 2 months) fell 6.6% in the Northeast month to month and was down 16.9% year over year.
Will the market experience a September swoon?
I don’t think a prolonged sell off is on the horizon. Much has been made of the fact that September ranks as the worst performing month for stocks over the past 20 years. The S&P 500 is up over 20% as we head into Labor Day weekend. This is the 9th time in the last 30 years the S&P has been up by double digits by Labor Day and in each prior instance the market has posted additional gains from Labor Day to New Year’s eve. Corporate profit margins are at an all time high. Double digit earnings growth is expected over the next year. The recipe for continued market gains is in place any pullback or volatility should be considered a buying opportunity.
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