Investment Strategy Changes as Summer Doldrums End in September

Summer is typically a quiet time for the markets, but quiet doesn’t mean your investment strategy gets to take a vacation. This summer was remarkably quiet, with the exception of the June Brexit turmoil and vote. In August, the markets were more than a little sleepy  with average volume across all U.S. stock exchanges reaching at its lowest level in over a year. How do quiet summer months typically impact investors, and how is investment strategy impacted now that September is here and the markets are back from vacation?

Investment Strategy And Volatility

The stock market this summer has been trading between 17,800 to the 18,500, and recent pulled back slightly to 18,000. While summer is typically associated with a quiet market, the September to November period tends to be a market with volatility both on the downside and upside.

Liz Ann Sonders, chief investment strategist at Charles Schwab, provides some insight into what is expected at the end of a period as quiet as the summer we have just had.

“History shows subdued periods tend to be followed by a lift in volatility, and some weakness in returns.”

While volatility means greater stock price movement higher and lower, most investors use this term when discussing downside risk or a market correction. For more insight, you can read her complete Market Perspective Report from September 2, 2016.

Adding Investments

We review your accounts regularly, and officially every month. We have been adding investments to clients’ portfolios with hedging strategies. These strategies are designed to temper downside risk while still participating in market advances. We are also shifting portfolio weightings toward growth stocks and mid-sized companies. These mid-sized companies tend to be takeover targets, are domestic oriented, and grow faster than their large global competitors.

We expect the market to be volatile in the next few weeks and market advances limited until a new President is sworn into office. Washington politicians are focused on securing power bases and getting re-elected. Any significant regulatory or tax reform will not occur until this election cycle is complete. If you have questions or concerns about the election cycle and your investment strategy, consider joining us for our October Investment Strategy Event, The Election Cycle and Your Investments.

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