Monthly Stock Market Report – September 30, 2014

Some Bumpy Rides Ahead…Buy the Dips 

Stock Market Report

If September’s stock market action (down 1.6%) and the volatility of the first few days of October (down 1.32% on Oct. 1 and up 1.12% on Oct 3) are any indication, the next few months to the end of the year will be a very bumpy ride. Investors can look forward to days or short periods of scary down actions mingled with days of hopeful rallies. Volatility will underscore the last quarter of 2014. Nevertheless, there are no reasons to panic and abandon your long-term investment strategies or asset allocation formulas.

On the negative side, the following potential developments could easily impact the markets:

  1. Conflict in the Ukraine involving Russia that could rear its ugly head at any time
  2. The expanding military actions in the Middle East that could spread to more Middle East countries
  3. How China responds to Hong Kong student protests, which could impact its economic growth
  4. The end of U.S. Federal Reserve (Fed) Quantitative Easing actions and the impact on long-term interest rates
  5. The strong U.S. dollar and its adverse impact on U.S. global companies’ profitability

On the positive side are these key market influences:

  1. Fourth quarter profit reports should show a healthy 3.5% increase in revenues and a steady 7% increase in profits.
  2. Forward-looking comments from profit reports should continue to express optimism for 2015.
  3. U.S. Gross Domestic Product (GDP) growth has rebounded and should continue its positive trend.
  4. The Fed’s policies should continue to defer any actions to raise interest rates, which should allow the U.S. economy to sustain a strong growth trend.
  5. Cash on the sidelines should continue to fuel an upward U.S. stock market bias.

Hence, we will maintain our TSOA retirement account allocation formulas and urge investors to continue to add to the holdings we suggested in our Fun Stocks Index and our recent blogs.  Take the opportunities that this volatile market gives you to buy quality stocks at cheaper prices. Buy the dips!

Good Investing!

Jim Tso

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