“Knock, knock, knockin’ on heaven’s door” – Bob Dylan 1973
America lost two iconic figures late last month, and both were quite inspirational to me. Putting it simply, Aretha Franklin had the best voice I’ve ever heard. The daughter of a minister, Aretha was the unquestioned “Queen of Soul”. She could have been easily dubbed the “Queen of Gospel” as well. She had range, power, expression, and emotion. Rolling Stone named her the #1 Singer of all time, and she was the first woman to be inducted into the Rock and Roll Hall of Fame. Aside from her prodigious talent, what really made me R-E-S-P-E-C-T her were actions that went largely unnoticed. She was a pioneer for female artists controlling their own creative destinies. While she was a self-confessed “Diva” onstage, Aretha was actually a very private person devoted to her family. Finally, while other successful artists sought the spotlight of LA and New York, Aretha stayed in Detroit. Rock Steady.
Senator John McCain of Arizona also passed away in August. In today’s age where popularity of political officials is at a historic low, John McCain defied the trend. He was a rare breed – a man dedicated to service for our country that preferred cooperation and compromise over partisanship and tribalism. He was strident in his views and certainly never backed down from a legislative fight. That being said, he believed in discourse and had many Democratic colleagues across the proverbial aisle. It speaks volumes that former Vice President Joe Biden delivered the primary eulogy at his funeral. John McCain had a vision for America that was rooted in safety and diversity. Arizona and the United States Senate will have a most difficult time filling his shoes.
Thankfully, the stock market suffered few losses overall last month. The Dow reached the 26,000 mark, the S & P 500 eclipsed 2900 and the NASDAQ shattered the 8000 barrier. Small and mid-caps also performed nicely. Laggards on the equities side were mostly in the international realm, as US stocks continue to outperform their foreign counterparts. Fixed income and commodities were flat to slightly lower. Volume was seasonally light and volatility remained in check. All in all, another positive month. Where do we go from here?
September and October are historically the worst two months of the year for stocks. As the saying goes, though, “prior history is no guarantee of future performance”. Yes, we could easily have a garden variety correction of 5-10% at any point in time. Markets simply do this occasionally as a cleansing mechanism. Barring that, we have to look at why the rally would stop. Other than an exogenous reason like an unexpected military debacle or terrorist incident, bull markets simply don’t end because they’re tired. When corporate profitability cycles weaken, that’s a problem, but it’s one that we’re honestly not seeing now. The other is if monetary policy gets ahead of productivity and earnings. Even though the Federal Reserve will undoubtedly hike interest rates another ¼ point this month, the bond market is not signaling Treasury yield inflation. It’s my macroeconomic sense that if these two parameters stay on their present course, equities should be largely fine.
I’m certainly not intimating throwing caution to the wind. President Trump’s ongoing issues and the mid-term elections in November are wild cards of uncertainty. However, the stock market has done a fine job ignoring the vagaries of Washington during the past two months. Let’s hope that it continues to concentrate on fundamentals this fall.
On another front, the transition with W3 continues to go quite well. We’re happy here, and it stays business as usual. Thanks as always for your ongoing trust and support. We look forward to talking with you soon.
The opinions expressed in this letter are those of William Schiffman and should not be construed as specific investment advice. All information is believed to be from reliable sources; however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Diversification cannot assure a profit or guarantee against a loss. Indices are unmanaged and do not incur fees, one cannot directly invest in an index.