3 Things We Learned During Summer Vacation

The fed, housing stocks and corporate rebounds took center stage

   

The kids are back to school, college football has started, the NFL kicks off this week, baseball is in its home stretch and Labor Day is over. That means the calendar is turning to fall, and soon, the last quarter of the financial season.

However, much like schoolchildren are tasked with recounting what they learned over the summer, we shouldn’t brush over the past three months without setting aside a little time for reflection. So before we turn our heads forward to think about what’s coming in the months ahead, here’s a look at a few big things investors learned this summer:

The Fed Matters … Kind Of

The stock market was a roller coaster this summer, and much of the whipsawing came around the two Federal Open Market Committee meetings in June and July. The issue at hand is whether and when to start “tapering” its current quantitative easing measures. The Fed has deemed continuation of the program necessary to support the economic recovery, keep inflation in check, and “to foster maximum employment and price stability.”

Many of us read that as “We won’t change what we’re doing,” yet differences in opinion among committee members about curtailing that program spooked investors. Additionally, any economic measures that showed an improved economy led to speculation that tapering might happen sooner (September) rather than later, causing more skittishness.

Still, while the Dow Jones Industrial Average finished down about 2% for the summer, the S&P 500 actually was up about 1% for the past three months while the Nasdaq clocked in with 4% gains. So perhaps the Fed’s action is already baked into the market.

Maybe not so on the bond side, however. Investors left bond funds in droves. As pointed out by Daniel Putnam, mortgage-backed securities and Treasury markets got clobbered while yields marched forward.

So what the Fed says does matter, and still will to some extent as we wait to hear about tapering.

Housing Still Is Recovering

The data coming out is fairly consistently up, albeit a bit slower of late. But new housing starts and permits are increasing, while home prices are starting to recover.

However, you’d never know it looking at the industry’s names. Homebuilder D.R. Horton (DHI) shed more than a quarter of its value between July and August, while Lennar (LEN, -20%) and Toll Brothers (TOL, -10%) also sold off heavily. Even Home Depot (HD, -5%) cooled off, though Lowe’s (LOW) actually surged 9% in the same time.

A lot of that might have been froth coming off the top of some pretty hot names, however. The broader signs are still pointing ahead, though things could get rockier if the interest-rate picture continues to balloon.

Sometimes, You Get a Second Act

It’s actually become sport to horse-race the next big U.S. business to go bankrupt. Will it be JCPenney (JCP)? How about Radioshack (RSH) or Barnes & Noble (BKS)?

But it’s not all bleak out there. A couple notables have fought back from difficult spots to make something of a comeback.

Best Buy (BBY) continued its torrid YTD run with 30% gains over the summer. Credit is due to CEO Herbert Joly who showed up last year, and proceeded to close down underperforming stores, matched competitor pricing and worked on the BBY shopping experience. And Green Mountain Coffee Roasters (GMCR) managed to navigate past Starbucks’ (SBUX) foray into single-cup machines, and tacked on another 20% to its year-to-date doubling. Part of the rise might be due to short sellers getting creamed, but why quibble?

As my mom would say, “Never say never.”

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/09/3-things-we-learned-this-summer-tsla-bby-hd-low-len/.

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