Market Commentary - August 1, 2007
Adam Bold, Chief Investment Officer, Smart401k.com:
S&P Performance August 1-2006 to July 27, 2007 (Red Line indicates the 1450 line, about the market close for August 1st. The 1450 line was last crossed in mid-April 2007.
I talked about last week’s five-percent negative move in the markets, saying I was obviously concerned but not overly worried. I’ve tried in my recent commentaries to emotionally prepare our clients for the possibility that we would go through a correction sometime soon.
Market downturns are a part of the normal investment process; markets move up and then they come back a bit. No market moves straight up all the time.
The market made its high at 1,552.50 in the S&P 500 on July 13; it closed Friday July 27th at 1,458.95, almost a 100-point decline over two weeks. On Feb. 20 earlier this year, it made a high at 1,459.70; two weeks later (March 5), it made a low at 1,374.10. We had close to an 85-point decline, a greater percentage decline than what occured last place. It took 42 days to get back to the Feb. 20 high. The resistance at 1,460 has become the support; I believe the majority of any decline in this cycle has taken place barring some natural disaster or terrorist attack we can’t foresee.
The economy remains good. Corporate earnings are good and getting better. Corporations continue to make massive stock repurchases, creating less supply for the same demand which drives prices up. Interest rates remain historically low; I believe we’ll continue in a range between 4.5 and 5.5 percent on the 10-year treasury.
