Although I am on vacation this week, camping with Josh, I am still closely monitoring the markets. (The joys and pitfalls of technology). The markets have had a continued sell-off in reaction to the Italian debt woes and to the massive downgrades to Q1 and Q2 US economic growth. The very disappointing ISM manufacturing index on 8/1 added fuel to the fire.
Despite the ADP jobs report coming in slightly better than expected and the ISM service index coming in only slightly lower, the markets are reacting, or as usual over-reacting. Although the current economic weakness is what I have been expecting and exactly what I discuss in depth in Facing Goliath, the rally is not over. Earnings continue to be exceptional and the Fed still has lots of wiggle room. In fact, the market weakness is very likely a cry to Bernanke for QE3… which it will get soon. Not until the world stops allowing the Fed to borrow at cheap rates, will we need to be ready for Goliath.
Don’t let these short term gyrations bother you. Get out and enjoy this perfect summer day. It will be over before you know it.
Cheers – Keith