Is The Market Entering a Bottoming Process?

According to the Wall Street Journal economic data released this morning showed that retail sales rose by 0.5% in July. This is a positive development and could provide evidence that consumers are not pulling back on their spending as much as anticipated.

“But that was for July,” you say, “and precedes the turmoil we have experienced in August.” That’s very true and Lowe Wealth Advisors believes that the August data that will be released in September will prove to be a very important gauge on true consumer spending. Retail sales definitely provide a window into the health of the economy because consumer spending makes up a significant portion of our economy and can reflect the sentiment of consumers.

The remarkable volatility seen in the markets over the past week approached levels that were seen during the market lows of 2008 and 2009. In fact, according to Ned Davis Research (NDR), average trading volume over the past week has reached its highest level since September 2008. NDR notes that the VIX Index (an index that measures volatility) reached a level of 48 on Monday. With a 52 week range of 14.27 to 48.00 (Yahoo Finance) the VIX was at its most extreme level since the market lows of March 2009. (It is not possible to invest directly into an index)

These could be signs that the market may be entering a bottoming process. Note that we use the word process to indicate a course or sequence as opposed to a single event. This means an extended period of volatility could continue and that new lows could be tested throughout this process.

Our goal today is to provide you with an updated perspective on the recent market events. We are by no means predicting that we are free and clear. In fact, to the contrary, the core problems surrounding the markets remain unresolved. It is possible that positive economic data could provide an opportunity for a temporary reprieve. The central issues that we continue to monitor are:

• The sluggish U.S. economic growth and concerns of a potential recession or little or no economic growth.
• The U.S. Debt crisis, which will resurface again as an issue as the newly formed committee of 12 begins to make recommendations for reducing our debt burden. We expect this to be no less painful than the recent debate. If political gridlock ensues, an additional downgrade of the U.S. credit rating by both S&P and Moody’s is a potential outcome.
• The European sovereign debt crisis that is well into its second year and continues to send shockwaves through global markets.

Until such time as one or more of the above factors show signs of resolution we believe that any potential market rally could be short lived. How and when these factors might impact the global capital markets remains to be seen. We know from recent history these have the potential to have a substantial and significant impact.

It is possible that a sluggish economy and potential recession may already have been priced into the stock market over the past week. It is not clear at this point.

The current economic environment has led Lowe Wealth Advisors to adopt a defensive posture for our actively managed portfolios. The expected uncertainty of future conditions means that we will most likely continue to lean in this direction. This means that if the equity markets stage a strong rally, our actively managed allocations could lag the benchmarks. However, it is important to consider that in theory, if one was more conservative during times of elevated risk the need to participate aggressively in a recovery is far less than it would be for someone who was not defensive. In other words, in theory, if one loses less one doesn’t have to take as great a risk during uncertain times because one has less loss to try to recover. (This statement is not intended to be predictive of future performance and does not advocate any specific strategy.)

That being said, we do not want to lose focus on the long-term perspective that the best time to buy can be when prices have fallen sharply. As appropriate, Lowe Wealth Advisors may seek to purchase holdings that we believe represent potential value and positions that we believe are appropriate for the current and future environment.
Our actively managed clients should expect to see an elevated level of activity in their portfolios as Lowe Wealth Advisors continues to manage potential risks and capitalize on potential opportunities that might arise. While we strive to hold positions for the long term, in an extremely volatile environment it is quite possible that we could purchase a holding, sell it, and buy it back again in a short period of time depending upon the goal of the particular holding.

The holding areas that we may consider could include mega-cap domestic equities, the Chinese currency, and consumer staple type companies. (This is not a recommendation to invest or execute any strategy and should not be used as the basis for any investment decision.) While gold is now at elevated levels, and a case could be made for investors taking profits in this asset class, our long- term view supports holding gold — and we may even consider bolstering positions as appropriate on any potential decline in price. (Note: gold is not appropriate for every investor and is historically volatile and should not be purchased without professional advice and evaluation of your personal situation.)

This commentary is intended for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this report will come to pass. While any general market information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Individual client needs, asset allocations, and investment strategies differ based on a variety of factors. Any opinions expressed are current only as of the time made and are subject to change without notice.

Lowe Wealth Advisors Conference Call August 9, 2011

On August 9, Gregory Lowe, CFP and Morris Segall of SPG Trend Advisors hosted a conference call for Lowe Wealth Advisors clients. On the call we discussed the current market environment, our strategies, our outlook and answered client questions. We are pleased to provide the opportunity for our clients to listen to a recording of the call by clicking the link below.

This call is intended for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this report will come to pass. While any general market information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Individual client needs, asset allocations, and investment strategies differ based on a variety of factors. Any opinions expressed are current only as of the time made and are subject to change without notice. Please note that the summary given below is a general summary and actual percentages and strategies in your personal accounts may differ. Not all portfolios are actively managed.

The opinions of Morris Segall do not necessarily reflect the views of Lowe Wealth Advisors and are not predictive of future results. Clicking the link below acknowledges you have read the disclaimer.

Click here to listen to the August 9 Conference Call

Market Notes August 4, 2011

We recognize that the recent political, economic and stock market turmoil is creating an uncertain and worrisome environment. We wanted to take a moment to update you regarding an additional shift we made in our actively managed accounts (not all accounts are actively managed).

Yesterday, Lowe Wealth Advisors continued to position our actively managed portfolios in a defensive posture by reducing equity exposure by an additional 10 percent to 15 percent, depending upon the allocation. We also want to remind you that in 2010, foreign exposure was virtually eliminated in our actively managed allocations.

Lowe Wealth Advisors continues to monitor the situation and will take additional steps if warranted in our actively managed accounts. We are also studying potential opportunities and places where we may want to put the cash we have generated to work. However, for the present time our focus remains on working to potentially preserve capital.

If you have not reviewed the comments from August 2nd discussing the steps we have taken over the past weeks in our actively managed portfolios we hope you will take the time to do so. The August 2nd commentary follows.

August 2nd Update

Last week, Lowe Wealth Advisors continued to shift toward a defensive posture in our actively managed portfolio allocations. We began to remove higher risk equity holdings and in many allocations purchased a position that had the potential to move in the opposite direction of the equity markets (i.e. inverse position).

This defensive posture was based upon the increasing anxiety surrounding the debt ceiling issues as well as the potential downgrade of the United States credit rating.
Over the weekend it was announced that an agreement was reached. By Sunday night futures for the domestic equity markets were rising significantly, pointing to a potential “relief rally” on Monday morning. At 9 PM Sunday night, Lowe Wealth Advisors convened our investment committee and counseled with our investment analysts to develop a strategy for the market open on Monday morning.

We made the decision that the “inverse position” had served the purpose for which it was intended (i.e. to potentially protect and dampen the impact of a catastrophic event) and that the immediate risk of the default and credit downgrade had passed.
Indeed, on Monday morning the markets opened higher and we removed the “inverse holding” and a “relief rally” appeared to be underway. The proceeds were put into cash where they remain. By mid-morning, the equity markets turned sharply negative based on poor economic news.

In spite of Congress passing the debt ceiling agreement the markets continued to trend down based on ongoing evidence of a weakening economy. By this afternoon several of the major market averages had dropped below their June lows, according to Morris Segall of SPG Trend Advisors.

Lowe Wealth Advisors continued to shift toward a greater defensive posture today (Tuesday) by selling out of the real estate sector in our actively managed allocations.

One of the primary factors we must consider is what might drive the equity markets higher? Absent QE3 by the Fed (which we are not advocating), Lowe Wealth Advisors does not see any immediate factors which could lead to a sustainable equity rally other than generally oversold conditions. With consumer spending faltering (Yahoo Finance) any sign of a factor which could drive the equity markets higher in the short-term appears to be diminishing.

According to Yahoo Finance, Moody’s and Fitch have kept the United States credit rating at Aaa and AAA respectively, though they did indicate a negative longer-term outlook. With Asian markets opening soon, we will await any positive impact of this news yet any potential impact could be short lived in our view.

We anticipate continued shifts toward a strategy focused on potential capital preservation over the coming days. You may see continued selling of certain equity holdings. Our cash positions as well as certain precious metals may be built to higher levels. Ultimately, as appropriate, Lowe Wealth Advisors would use any significant downturn as a possible buying opportunity.

Should you have any questions please feel free to call or email us.

This commentary is intended for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this report will come to pass. While any general market information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Individual client needs, asset allocations, and investment strategies differ based on a variety of factors. Any opinions expressed are current only as of the time made and are subject to change without notice.

Important Disclosures

• Not all portfolios are actively managed. If you have a question about how your account is being managed please contact us.
• No diversification can completely protect against market risk or other risk factors with investing. A diversified portfolio could still lose money.
• An Index is a portfolio of specific securities (common examples are S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is not indicative of future results.

Foreign investing carries additional risk such as currency risk, political risk and different accounting standards.

*Lowe Wealth Advisors is a registered investment advisor.