If you are tempted by recent positive economic data to jump into the market with both feet or head to the beach for the summer and forget your portfolio, you might want to rethink your strategy, counsels MoneyShow's Tom Aspray.
The bullish stock market in 2013 has fueled a surge in IPOs over the past six weeks as $5.2 billion has been raised by 26 new companies. The fact that Facebook, Inc. (FB) has finally moved above its initial offering price has also reassured investors.
The major averages are flat to up slightly for the month after last week's decline. As I concluded last week, one should not expect August to match the outstanding gains that we saw in July. The slight weakness early last week made many commentators turn cautious rather quickly.
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Stock investors should have been happy with their July account statements and with the further new market highs in early August. Of course, the concern over the global economy has still kept many out of the stock market despite the year's impressive gains.
The outlook for the US economy has continued to improve, and late last week, there was trade data out of China suggesting its economy may be stabilizing. It would be good to see consecutive positive data points out of China as the trend has not been consistent.
There were more signs of improvement for the global economy as the Organization for Economic Cooperation and Development's (OECD) composite leading indicators pointed to firming economic growth. The chart shows that the indicator dropped below the 100 level in 2011 but then moved back above it in 2013.
Japan, the United Kingdom, and the United States show evidence of firming economic growth. In the euro area, the growth trend looks the best for Germany, with improvement in Italy, but rather flat action in France. Their growth momentum analysis still suggests slowing in China, Russia, and Brazil.
A few weeks ago, I focused on some of the euro countries' debt levels, as well as the improvement in some of their manufacturing data. Their stock markets have continued to rally sharply as the iShares MSCI France (EWQ) is up over 13% since early July and is doing just slightly better than Germany (EWG).
Even more surprising is Spain whose unemployment rate is over 26%. The iShares MSCI Spain (EWP) was down 6% for the year in late June, but is now up over 11%. All three look positive technically but are closing the week above their starc+ bands indicating that we should get a better entry point in the next few weeks.
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