the Euro Zone, mixed Fed speak to give hopeto those looking to postpone tapering as longas possible and a small increase in consumer confidence. The end of the month was allabout the growing tension with Syria(boosting oil prices) but ended on a high noteas U.S. GDP came in unexpectedly high (2.5%annualized vs. the previous 1.7%).Despite emerging good news, European equi-ties lost some of their recent luster, perhapsto adjust for the strong showing that took place last month.The first week of September was a positive
Stock Market Commentary
September 7, 2013
Lane Asset Management
Every cloud has a silver lining. In the case of theclouds, we have, in nospecial order: Syria, Fedtapering, a new Fedchairman, debt limit ne-gotiations, Obamacare,stretched market valua-tions, weakening corpo-rate profits and revenuegrowth, the lowest labor-force participation rate in35 years, declining in-creases in non-farm pay-rolls and technical weak-ness.For the silver lining, wehave, in part: ISM Busi-ness Activity Index andauto sale strength,Obamacare (!), EuroZone, U.K. and China re-covery, and absence of amajor stock market bub-ble on the horizon.My observation: The risksappear real and signifi-cant but they also appear to be rather short term.The silver lining is aglobal recovery, even if itis slower than we wouldlike.
one for everything but investment grade corpo-rate bonds as new auto sales advanced to prere-cession levels and the ISM Non-ManufacturingBusiness Activity Index (NMI), representing about90% of the U.S. economy, came in at its highestreading since its inception in January 2008 whileinterest rates continued to rise. The Manufactur-ing Index also had a good showing, rising to itshighest reading of the year. August non-farm pay-rolls came in below expectations, but the marketseems to be taking that as a sign of reduced incen-tive on the Fed to begin tapering in September, assome thought.Investment Outlook
While I’m concerned about the stretched valua-
tions for U.S. equities, the steady improvement inthe ISM reports and in corresponding reports inEurope have to be taken as a positive sign for theequity market. And, while an equity correction of 10-15% remains a possibility, maybe a certainty atsome point, the longer term horizon for equitiescontinues to look favorable. With that, I suggest:
Increase exposure to safer, stronger U.S. sec-tors like consumer goods and health care
Consider adding exposure to international.As for bonds and other income investments, I rec-ommend keeping durations short and consider high yield corporate bonds.
The charts on this and the following pages use exchange-traded funds (ETFs) rather than market indexes since indexes cannot be invested in directly. The ETFsare chosen to be as close as possible to the performance of the indexes while representing a realistic investment opportunity. Prospectuses for these ETFs canbe found with an internet search on their symbol. Past performance is no guarantee of future results.