Dow 13,000?!
Wow. It’s been less than a month since I posted a chart on this blog about the Dow reaching 14,000 and closing at that price (look back at my July 19th blog post). Just 4 days shy of a month and the Dow has fallen over a thousand points on concerns over the sluggish real estate market, over-extended consumers and therefore a concern that consumer confidence is wavering, subprime mortgage defaults potentially exploding, and a lack of liquidity as investors shun mortgage-backed securities - especially those by subprime borrowers.
While the market briefly rebounded for a day in response to the Federal Reserve injecting more liquidity into the banking system, the sell-off continues and the Dow Jones Industrial Average has closed today at 12,861.47. The article posted to Yahoo! Finance does an excellent job summarizing what’s currently going on in the market. (Adobe PDF Version).
Unless we start to see some positive economic data or corporate earnings being released, I would expect to see a few more weeks of the market trading overall downward, with a few upswings as some investors jump back in to buy shares at lower prices than they previously sold as well as investors covering their calls or adding more shares to their account to lower their average basis (those die-hard dollar cost averaging investors). In general though, the Yahoo! article was right that historically and typically the months of August and September are the slower months for the stock market. It may be an excellent time to buy if you are in it for the long-term, say 1-3 years. But I am not expecting to see the Dow Jones Industrial Average back up to its all-time high, or even remotely close to 14,000, by the end of the year.
As always, I appreciate your comments and feedback…