With the summer period (Aug - Sep) coming where it is one of the traditional periods where stock markets are at their worst every year. We should be expecting markets to be heading south in the coming 2-3 months. Why do I say this? Let's do a reality check on the negative news that have plagued the market:
1. Israel VS Lebanon Middle East tensions have been growing at an all time high with Israel cabinet approving an extended ground offensive into Lebanon against the Hizbollah(although they have temporary withheld it pending a UN resolution). This puts investors into a nervous mode.
2. High Oil Prices Oil has since soared 25% this year almost to an all time high of $77 per barrel. It does not help when BP announce that it is shutting down a relatively large oilfield (400k barrels per day) due pipe corrosion. The Mid East tensions are making it worse.
3. US worse housing glut in 40 years The housing boom that US has enjoyed for the past 3-5 years looks set to be coming to an end as interest rates rise, new homes orders plunge, etc. This may have a negative impact on the American psyche where they have a sizeable chunk of their assets tied up in real estate. As americans psychologically feel that their assets are shrinking due to falling real estate prices, they may slash consumer spending which has helped averted a recession for the past few years.
4. Foiled Terrorist Plot (UK to US flights) This seems like a good news but apparently investors are taking it seriously. The UK and US authorities have imposed tight restrictions on hand baggage and raising the alert level to RED. In addition this news may have impact on the tourism sector with people cutting back on tours, resulting in losses for airliners, hoteliers, resort operators and also tour agencies.
1. Israel VS Lebanon Middle East tensions have been growing at an all time high with Israel cabinet approving an extended ground offensive into Lebanon against the Hizbollah(although they have temporary withheld it pending a UN resolution). This puts investors into a nervous mode.
2. High Oil Prices Oil has since soared 25% this year almost to an all time high of $77 per barrel. It does not help when BP announce that it is shutting down a relatively large oilfield (400k barrels per day) due pipe corrosion. The Mid East tensions are making it worse.
3. US worse housing glut in 40 years The housing boom that US has enjoyed for the past 3-5 years looks set to be coming to an end as interest rates rise, new homes orders plunge, etc. This may have a negative impact on the American psyche where they have a sizeable chunk of their assets tied up in real estate. As americans psychologically feel that their assets are shrinking due to falling real estate prices, they may slash consumer spending which has helped averted a recession for the past few years.
4. Foiled Terrorist Plot (UK to US flights) This seems like a good news but apparently investors are taking it seriously. The UK and US authorities have imposed tight restrictions on hand baggage and raising the alert level to RED. In addition this news may have impact on the tourism sector with people cutting back on tours, resulting in losses for airliners, hoteliers, resort operators and also tour agencies.
All this points to a perfect recipe for markets to fall in these few months which are traditionally quiet before the year end window dressing by fund managers. I would personally be holding cash reserves before the big kill around October period. This is not a recommendation to buy.
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