Back to Work

(September 5, 2002)Once again, the traditional vacation season ended with the Labor Day weekend. Most of America went back to work or back to school on Tuesday, September 3rd. Statistically, September has been one of the worst months for the stock market in terms of performance. Is it because we are grumpy about getting back to work or are we depressed at the official end of summer? A more likely reason for the poor September performance is the stock market’s focus on the short-term economy versus the long term.

From an economic point of view, September’s position in the calendar year is awkward. It follows several months of historically slow production due to the cycle of summer vacations in June, July and August. It proceeds typically one of the strongest quarters of the year (the fourth quarter) when economic activity picks up and businesses strive to meet and exceed year-end goals. September is therefore sandwiched in-between two anxieties. The concern that the traditional summer slowdown will persist into the fall and the concern that the fourth quarter goals may not be met.

This September has begun exactly as described above. The slowdown in economic activity, along with the market plunge of June and July, has us worried about a “double dip” recession for the economy. The fear of a “double dip” is the fear that the summer slowdown will turn into a new recession on the heels of our last brief recession that ended in the first quarter of this year. Yet, we are also concerned that the forth quarter will be weaker than expected and that the bottom has not yet been felt for this market cycle. Our feeling is that we will not suffer a “double dip” and that the economy and markets will improve in the fourth quarter. However, since we are all expecting a bad September we will probably have one. If the markets look hard enough for bad news they usually find what they want.