The Dow Jones Industrials fell almost 4.5% in August. Looking back, it is a wonder that that key stock market barometer did not fall even more.
Now comes September, the month with the worst stock market investment performance in multiple academic studies going all the way back to 1960.
September 2013 has all the ingredients to shape up to be really bad for Minnesota stock market investors. The first scary fact is the fifth anniversary of the stock market crash in September 2008.
The most obvious stock market problem now is the conflict in Syria. Gold and oil prices have rebounded dramatically. Those two key commodity prices move higher at the same time are not usually good news for stock prices.
Don’t forget about our elected officials in Washington. The U.S. government will run out of money at the end of September unless Congress takes action before then. Also remember that the debt ceiling is right around the corner in mid-October.
Unless Congress and the White House gets things figure out in September, the U.S. government will not be able to pay its bills in October. No big deal.
If a potential U.S. government default is not bad enough, don’t forget about the Federal Reserve. “The Taper” has long been rumored to begin in September. Interest rates on mortgages and car loans have moved higher in the last two months.
If the Federal Reserve begins to buy fewer government bonds in September, interest rates will likely rise even more. The one thing that the fragile housing market does not need right now is rising interest rates.
Any small or large combination of the above events could set the stage for a large stock market decline. U.S. stock market investors can reasonably expect more volatility in September at a minimum.
No one can ever predict when a significant stock market decline will take place. With all these major government and economic events lined up for September, it is not a stretch of the investment imagination to be very concerned.
Don’t be surprised by this September. The investment professionals who manage stocks and bonds every day will not be surprised. They have already been net sellers of both stocks and bonds for the last several weeks.
The kids and grandkids are now back in school. You should be able to find the time to take a look at your current stock and bond market risk. If you own a stock or bond market investment that you are not comfortable with, now is the time to move that money to the safety of the money market.
The investment year of 2013 has been good so far. You need a stock and bond market risk management game plan now in order to preserve those investment gains.
Ric Lager
Lager & Company, Inc.
