“modest to moderate” economic growth, the
U.S. market continued to gain while the Euro-
pean and emerging markets couldn’t contain
themselves as the good economic news con-tinued to pore forth.Then came the triple whammy of a possibleavoidance of a Syrian strike by the U.S., Larry
Summers’ withdrawal from consideration as
Fed chief, and the Fed deferment of QE ta-
pering (it doesn’t get much better than this).
Then enthusiasm waned (or profit-taking setin), taking some steam off the markets for the
rest of the month. This “relief” was then re-
Stock Market Commentary
October 6, 2013
Lane Asset Management
Last month, we talkedabout the clouds on thehorizon. This month, wecan talk about the bulletsthat were dodged duringSeptember: no attack onSyria, Larry Summerspulling out of contentionas Fed chairman, and theFed postponing the wind-down on QE. Interest-ingly, even the govern-ment shutdown seemedto have even less effectthan might have beenimagined. While short-term exoge-nous risks remain, e.g.,an extended governmentshutdown and/or unre-solved impasse on thedebt limit, my larger con-cern now is whether themarket has gotten aheadof itself in the event of slower than expectedcorporate earningsgrowth when third quar-ter results start appear-ing. With above averagemarket valuations, weak earnings could turn outto be the next bullet.
inforced by weak U.S. retail sales figures andgrowing concern about a U.S. government shut-down (later realized). Interestingly, the marketseems to be taking the shutdown in stride, at
least, so far. We’ll see what happens as the debt
ceiling date comes closer.Investment Outlook As valuations remain stretched and the marketcurrently looks overbought, despite all the goodnews in September, I think there is still reason tobe cautious heading into the balance of the year.If a 5-15% correction concerns you, I would takesome equity exposure off the table.That said, as of this writing, there are still areas of good relative performance, including:
Healthcare, especially biotech
Large cap value
International developed markets, especiallyEurope
Emerging markets (longer term)
Short term high yield bonds and floating rateloan funds.** *** **
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.