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Market Update: September 6, 2012

John Gorlow | Sep 06, 2012

August Review


Trading volume was at its lowest in five-years but U.S. stocks still managed to finish the month with solid results. The S&P 500 ended August with a gain of 1.98%, a two-month run of 3.26% and a rise of 11.85% year-to-date. The summer rally confounded bears who predicted the stock market would repeat last year’s slump of 7.7% during July and August. The S&P Small Cap 600 index, which trailed the performance of the S&P 500 index in July, reversed its standing in August posting a 3.66% gain.


July factory orders registered their biggest jump in a year and consumer hopes rose. But the economy is still stuck in low gear. Federal Reserve Chairman Ben Bernanke hinted that additional stimulus could be on the way. Concerns about the fiscal cliff, jobs, housing, the mortgage markets, health care, European debt woes and tensions in the Middle East continue to grow.


The Int'l Developed Markets (EAFE) ticked broadly higher. The MSCI EAFE Index rose 2.36%. Stocks in the Euro region gained 6.78% as confidence grew that the ECB will deal with the debt crisis.  The Asian markets were mostly weaker led by a 1.38% drop in Singapore. Australia, Japan, and New Zealand markets also fell. The broad Emerging Markets (MSCI) declined 0.54% and the all China Index (MSCI) dropped 3.92%, to close near a 3½-year low.


The 10-year U.S. note yield fell to 1.55%. The municipal bond market was flat, investment grade corporate bond prices tacked on small gains and high-yield bonds continued to outperform.


The Dow Jones AIG commodity index rose 1.30%. Petroleum was the strongest driver of returns. Anticipation of additional monetary stimulus helped spark a 4.5% rally in gold prices. The agriculture sector took a breather in August, as the rally in grain prices settled down.


A new federal proposal would make stock investing even more dangerous. Say what? If the SEC proposal to remove a long time prohibition on advertising passes into law, investors will be bombarded with ads for private offerings not subject to disclosure requirements. This advertising will make it easier for hedge funds to find investors but it will also open the door to fraud if cold callers are allowed to lure vulnerable people into unsuitable investments. When it comes to investor protections, pruning regulation without making better rules to keep things safe for the average investor doesn't make any sense.