Commentary

From the Executive Editor

By George Chamberlin

Stalled market gives long-term investors pause

The first seven months of 2015 have tested the mettle of long-term investors. It’s not that portfolios suffered big losses; rather, the major stock indexes, for that matter all investments, went nowhere.

George Chamberlin's Money in the Morning

A tough month for commodities and things could get worse. While stock prices continued to move sideways again in July -- the Dow industrials are down 0.75 percent since the start of the year seven months ago -- certain commodity prices moved sharply lower last month. Oil took the biggest hit, down 21 percent, while gold saw prices fall 6.5 percent. And the declines are continuing today. Oil has dropped an additional 2.5 percent in early trading and has dropped below $46 a barrel, the lowest level in more than four months. It is all about supply and demand. The world remains awash with oil while global demand is softening. Add into the equation the big increase in Iran oil exports and you are setting the stage for even more price plunges.

George Chamberlin's Money in the Morning

So long to July. The dog days of summer on Wall Street can often test the stability of investors. Maybe the heat and humidity put people in a bad mood and, as a result, turn them sour on stocks. According to the American Association of Individual Investors, only 21.1 percent of investors are currently bullish on stocks, a seven-week low. At the same time, bearish sentiment spiked this week to 40.7 percent, the highest level since August 2013. Historically, the rate of pessimism is about 30 percent. Contrarians celebrate numbers like these. Even Warren Buffett would tell you the best time to buy stocks is when no one wants them, which appears to be the case right now.

Retailers bracing for back-to-school shoppers

More than 500,000 elementary and high school students in San Diego County, not to mention tens of thousands local college students, will be returning to the classrooms soon.

George Chamberlin's Money in the Morning

Stocks extended their recent rally yesterday. Despite some sharp selling in a couple of social media companies, Yelp and Twitter, the blue chip stocks rose nicely with the Dow industrials gaining 121 points, making the gain in the past two sessions more than 300 points. Overall, corporate earnings reports for the past quarter have been pretty good and the domestic economic news at been in line with expectations so attention has shifted away from Greece and China and back to what matters.

George Chamberlin's Money in the Morning

Stocks don't go up forever, nor do they decline forever. After dropping about 500 points in the previous five sessions, the Dow industrials snapped back yesterday with an impressive gain of 190 points. As so often happens, the rally occurred on the day before an announcement from the Federal Reserve. At 11 a.m. Pacific time today, Janet Yellen and the others at the Fed will release a statement following two days of meetings explaining their current reading on the economy, interest rates, the labor market and inflation. However, what most people will be looking for is some specific indication of when there will be a change in policy allowing the first increase in short-term interest rates in nearly a decade. In most cases the anticipation of the release creates more volatility than the actual statement itself. We'll see what happens this time.

George Chamberlin's Money in the Morning

Five in a row. Stocks extended their recent decline yesterday with a drop in the Dow industrials of 127 points. That makes it five trading days in a row to the downside as investors continue to fret over international situations and turn their attention away from Greece to China. It is unfortunate that people remain focused on global issues rather than watching what's happening at home. Today we are getting solid Q2 earnings reports from UPS, Ford Motor and other companies. To be sure, the day has started with a modest stock rally but we'll wait and see if it sticks.

George Chamberlin's Money in the Morning

Geez, I take a week off and the stock market tanks! I pretty much ignored financial news last week and was a bit surprised to see a 3 percent drop in the Dow industrials and other market indexes. Seems the tension has shifted away from Greece -- tourism there is booming -- and the attention has shifted to the worsening situation in China. The problems there continued this morning with the major Chinese stock market indexes dropping an additional 8.5 percent.

George Chamberlin will return

George Chamberlin will return Monday, July 27.

George Chamberlin's Money in the Morning

Stocks continued their steady move higher yesterday. The Dow industrials tacked on an additional 70 points to the already impressive gains ever since the Greek government caved in to pressure from the EU to accept the conditions of an economic bailout. The Dow has been up in five of the last six sessions. The gains were even bigger at the Nasdaq, which closed yesterday at a new all-time high. That index is moving even higher today after Google and Netflix reported better-than-expected Q2 results.

George Chamberlin's Money in the Morning

Well, it had to end sometime. After a substantial rally over the past four trading sessions that saw the Dow industrials gain more than 500 points, investors decided to step in yesterday and take some profits. Yes, the Dow gave back 4 points in active trading. Actually, it was 3.41 points. Expressed as a percentage, it was a decline of 0.002 percent. But, a loss is a loss and it creates the opportunity to start another streak of winning sessions.

George Chamberlin's Money in the Morning

Four in a row. Yesterday's 76-point gain in the Dow industrials represented the fourth session in a row the index has moved higher. How impressive is that? It is the first time the Dow has gone up four days in a row since January, evidence of the volatility marking the first half of 2015. The move above the 18K level came at a time when most analysts were suggesting the ducks were in a row for a sharp correction in stock prices. Unfortunately for the permabears, there doesn’t seem to be many people willing to get rid of their stocks, especially when there are few attractive alternatives.

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George Chamberlin

GEORGE CHAMBERLIN has been associated with The Daily Transcript at SDDT.com since 1998 and became Executive Editor in 2006. He is responsible for the development of editorial strategies for the newspaper ...

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