Dog Days of Summer

I don’t know about you but I certainly feel we have entered the Dog Days with Sirius, the Dog Star, rising bringing in a period of sultry weather together with sloth like attributes of lethargy, inactivity, and indolence. Weather definitely is the main determinant of the activities of the day such as exercise, walking the dog, or sprucing up the garden and patio. My favorite sloth like activity is watering the various plants and shrubs around our house. Before you snicker, watering has many great attributes if you are experienced and dexterous such as drinking a beverage, listening to music, and visualizing some hot and sweaty activity that can easily be delayed because I am doing a needed task. In case you were wondering, this commentary was written, in my mind, during my watering activity yesterday so another worthwhile task completed while exercising my elbow and multi-functional sprinkler head.

Before I get carried away with Dog Days activities let’s talk about the stock market. Despite a great deal of concern and disbelief from strategists that this market cannot possibly continue to grind higher with so many possible landmines and danger signs flashing cautionary signals, we continue to enjoy a rising market driven by a dovish Federal Reserve and a dysfunctional Congress and Administration that seems to have embraced the Dog Days mentality for much of 2019. The dovish Federal Reserve was on stage last week and did nothing to dissuade investors to get off this rising stock market train and implicitly stay focused on the keys to multiple expansion; low interest rates and a stable economic backdrop.

This week we enter my favorite period of a new quarter when companies face their shareholders and report their earnings and cash flows for the previous three months and provide a glimpse of the future in their guidance and forecasts. Going into the this particular quarter I believe expectations are fairly modest and therefore the so-called bar to jump over is not terribly high and perhaps can be viewed as a success. The tricky part for analysts and shareholders will be deciding if the forward guidance is strong enough to keep the wheels turning round and round and keep this Long Train Runnin ala Doobie Brothers. My view is that investors will stay involved and stay long stocks as long as their interest rates stay historically low. We will see early as the major banks start reporting early this week if investors remain complacent and stay focused on recent dividend increases and capital allocation that is favorable for long term investors.

Have a great week,

Roger N. Steed

July 15, 2019

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