This week the market edged lower on low volume trading, typical of this time of year. Overall, investor’s where waiting for more data to prove that inflation is under control, and the Federal Reserve has ended raising interest rates. There is an increase in opinion on the street that the Fed may actually cut interest rates in the spring, if inflation is in fact not under control.
Recap of weekly performance:
DJIA: Down $97.42 or -0.86%
S&P: Down $7.21 or -0.55%
NASDAQ: Down $23.66 or -1.09%
Crude was up as a storm brewed in the Caribbean, Tropical Storm Ernesto may potentially threaten the oil infrastructure in the Gulf of Mexico. Crude closed up $0.41 a barrel, or 0.57%. We will have to wait and see if Ernesto forms into a land threatening hurricane, at time of publication it is unknown what path He will take.
Housing sales are cooling down significantly, as supply outpaces demand, and increases in long-term interest rates are making financing more unattractive for homebuyers. We will have to wait and see what effect this will have on the economy as a whole.
With a large amount of traders still on summer vacation, it is difficult to gauge the market on the low volume being produced. There are several issues that the market will have to face in order for short-term/moderate-term gains to be produced. These include inflation, interest rates, rising energy costs, decline in value of the dollar, expansion of the Federal deficit, and terrorist fears domestically and abroad.
We, though, as smart, savvy value investors do not fear these issues, and frankly look at them as potential buying opportunities. We believe in our economy and the free market and trust that the long-term prospects look positive and enticing. You, as the reader, share our views (hopefully) and we are all in the same boat looking for undervalued companies that meet our individual levels of risk. Do not get caught up in the daily noise in the media, they are in the business of making the news. We are in the business of making money on our investments, and we are smart enough to read through the lines and pick apart the useful data. So until next week, have a productive and profitable week!
-Ben and Jon
ModernGraham.com
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