September is usually a down month for stocks. If the past week is a preview, I see no change for 2009. We are starting to see a pattern emerge surrounding earnings. Once earnings season begins, the market rallies. As more companies report an improvement from the previous quarter and outlooks begin to improve, the market reacts favorably for almost 2 months. Then earnings optimism wears off and economic data is the only measurable news for the market. This data is flip-flopping between positive and negative. We see home sales rise but foreclosures also rise. China's GDP is ridiculously high for a recession, but the White House lowers our expectations for a quick recovery.
I do not think the market is going to see a significant correction. We will see some pullbacks and some stalling leading up to the next earnings season, but no complete pessimism like we saw at the beginning of the year. Of course unemployment will rise a little further and GDP will take time to recover, but earnings will be increasingly easier to beat compared to year over year numbers. There is lots of reasons to be bullish. Once we see consumers start to spend again and pay off their debts, the market will soar. The market will not spike anytime soon, which is a good thing, but we will see a moderate climb. Now is a good time to cash in on profits and wait for earnings season to roll around again before its time to make serious cash money.
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