After this weekend, the summer session for the markets will be winding down.
August historically is a listless time for the markets. In the US, Congress is closed so there are fewer major announcements regarding public policy.
In Europe entire companies and Governments will close down for a month as the continent goes on vacation.
Traders take advantage of the lull in action to hit the Hamptons. The end result is a quiet time for the markets with low volume.
Adding to the doldrums this year is the fact that Bernanke didn’t attend the Fed’s Jackson Hole meeting, so there were no new major announcements from the Fed this month. On top of this, Angela Merkel is seeking real election in Germany in September, so there has been a concentrated effort to keep things “quiet” over there.
But none of this means that everything has been resolved. Indeed, over the last week we’ve seen a number of major issues resurfacing. Investors need to be aware of the following:
- Germany’s finance minister Wolfgang Schauble has state that Greece would need yet another bailout.
- Italy’s bonds have plunged again as the Italian Government is beginning to fall to pieces.
- Brazil officially entered the currency wars launching a new $60 billion currency intervention, its largest in history.
- The NASDAQ was shut down for several hours last week due to a “glitch.”
- China’s economy is lurching towards deflation with even the Government admitting that its recently published great data were bogus.
These issues did not simply go away based on the fact that people were on vacation. So expect volatility to increase going forward.
This is not to say that there will not be ample opportunities for investors to make money. There is always a trade or investment to be made. And provided you follow the right strategies, even volatile times can pay out wonderfully.
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