The stock market swings of this week are evidence about not only the volatility of the stock markets, but also the potential fragility of the current levels.

The markets reacted negatively to the news that China had raised interest rates unexpectedly, only to rebound the very next day. Nothing changed in China, yet 24 hours later investors drove the markets higher in what we believe is a continuation of “over-exuberance”.

Yes, corporate earnings look good in some sectors. However, many of those same companies which are posting good earnings are also stating that their revenues are light. Without strong revenue streams driving the companies, one would expect the continuation of good earnings to be problematic.

Since the summer of 2009, the recovery in the manufacturing sector has provided a significant boost to the economic recovery. For the past several months we have been noting the weakening trends in the economic recovery. Of particular concern to Lowe Wealth Advisors, is the weakening trend in the manufacturing sector.

If the manufacturing sector continues to weaken it could further erode any upward strength in corporate earnings. If this occurs, the first half of 2011 could experience very little, if any, economic growth. This scenario would surely move the Fed to try to avoid a double dip recession.

While the Fed could be successful the result would likely be increasing inflationary pressures. Lowe Wealth Advisors remains vigilant to the signs of the slowing economic recovery. As a result, we remain in a defensive posture in our actively managed discretionary allocations.(see disclaimer)

In early November Lowe Wealth Advisors will be hosting a call with Morris Segall to discuss the current stock market environment and our strategies in detail. For the first time you will be able to invite your family, friends, colleagues and anyone else who might find value in our insights and ideas to join the call. More information about the call will be forthcoming in the near future.

In response to many questions we have received about the current environment, real estate prices, and in general what individuals and families should be doing during these challenging times, we have developed a Frequently Asked Questions document. Click here to read it.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Not all portfolios are actively managed. If you have a question about how your account is being managed please contact us. Generally accounts less than $150,000 are not actively managed. 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.

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.