Newspaper article Sarasota Herald Tribune

Fed and Interest Rate Worries Are Overblown, So Keep Calm

Newspaper article Sarasota Herald Tribune

Fed and Interest Rate Worries Are Overblown, So Keep Calm

Article excerpt

It is summertime once again, and the living is easy -- or at least it used to be. Nonetheless, the Fourth of July is the unofficial start of the beach-and-barbecue season. It is also when everyone asks the same question: Will we see a summer rally on Wall Street between July 4th and Labor Day?

Statistically, July is the best month for stock prices in terms of percentage gain. Furthermore, the Dow Jones Industrial Average has rallied during 60 of the past 67 summers. And the preponderance of data indicates that the stock market is subject to seasonal quirks.

Of course, if you subscribe to the theory that the stock market represents a series of independent events, then a rally has exactly the same statistical probability as no rally. And there is no doubt that the annual expectation of a summer rally is partially the consequence of the fiction and fantasy that always seems to envelop stock trading.

At its worst, the folklore simply contributes to the market's overall mystique. Yet longtime observers of the stock market concede that it does exhibit seasonal tendencies. Of greater significance is that Wall Street is considered to be a forward looking economic indicator and the Street now seems to portend potential rip currents ahead.

The host of CNBC's "Mad Money," Jim Cramer, was on the money when he said the market's bulls have a lot of enemies. For example, many larger bond investors entered the equity markets when interest rates were in the basement, and dividend-yielding stocks became the only place for yield. But as these shares increased in price, the yield fell -- but the market risk did not. Not a palatable situation for those whose forte is fixed- income investing.

Meanwhile, emerging markets became a trap as a result of the strengthening dollar. To make matters worse, many who were long on shares of Chinese companies found that the economic data out of Beijing certainly called that premise into question. As a result, many China bulls are now running for cover.

Recent comments from Fed chairman Ben Bernanke certainly did not help companies related to homebuilding, raising concerns that higher mortgage rates would hurt the housing industry. …

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