September 3 – 7, 2007: Week in Review
No need for graphs this week. It’s a pretty simple story. Once again, we saw a week of ups and downs with no real trend in any direction. As I mentioned in the last few week in review posts, I see the market as being in a bit of a testing/basing period right now and it could be a bit of time before we know what the market will do next.
There were some disconcerting developments this week, however. Actually, there were disconcerting developments today. The job market saw contraction for the first time in four years and, while unemployment remained roughly the same, it was due to people leaving the workforce a decidedly negative sign for growth. Sales and earnings out of some big name retailers were mixed. Just to highlight a few, J. Crew (which I own) announced stellar earnings once again, but failed to make the all important sales numbers which retailers are judged by. Saks Inc. saw terrific same store sales growth. Office Depot and Harley Davidson, on the other hand, both came out with some poorer than expected results across the board leading. That being said, overall sales growth was strong with 64% of retailers reporting better than expected same store sales growth. (See this article)
In other news, housing continued to surprise even the staunchest bears with its seemingly unfettered free fall. And, credit and liquidity concerns seem to be creeping back into the mainstream media.
Overall, I remain confident of our economy’s ability to keep the subprime issue from spilling over and causing broad scale recession, but I’m beginning to waver on my belief that the Fed has no reason to cut rates. New economic data is seeming to point towards a slow down and it may be time to try to nip a downturn in the bud. Something needs to tip the balance back in favor of the consumer, who I believe drives the market and it would seem that that ball is in the Fed’s court now. Will we wait until we receive news so dire that even a rate cut won’t soothe the markets? Or, will the Fed decide that a little pre-emption is acceptable given the unprecedented nature of the meltdown in the subprime markets and consider itself lucky that it has had as much time as it has to weigh the benefits and the risks of cutting rates? I would prefer not to see the economy contract given that I am both invested in the markets at the moment and also very much in need of having a job in the near future.
For now, there’s not much that can be done. Going to cash wouldn’t be a bad idea should you have some stocks you’re looking to take profits on. If not, trust that you’ve picked strong, resilient companies and ride out the storm. This isn’t a market for short term investors. Maybe traders (I’ll let them decide for themselves), but definitely not for investors.
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