Blog : A Farewell to Summer

by Ed Zwirn on August 30th, 2013

You may have your own wonderful memories of the summer that ends this weekend. Maybe you will remember the summer of 2013 for that sailboat ride you took, the beautiful girls on the beach or for that particularly succulent rack of ribs you kept smoking on the barbeque for 12 hours.

But whatever succulent summer memory you may delightedly carry forward with you after the Labor Day weekend, penny stock investors will be hard-pressed to come by market memories to savor. The stock market, as measured by the Dow Jones Industrial Average, lost about 3.2% of its value between Memorial Day and Labor Day, going from 15,303.10 to 14,810.31.

And this fall has been most pronounced in the latter part of the summer, with the DJIA losing over 4.4% in August alone, its steepest monthly drop since May 2012. And while penny stocks and other small caps in general didn't do as badly as the 30 blue chip Dow stocks, the broader market did perform badly, with the NASDAQ down 1 percent and the penny stock-rich Russell 2000 index off about 1.8%.

The acceleration of this bad news is understandable for a few reasons. For one thing, U.S. financial markets tend to perform poorly in the late summer, as key players understandably would rather go on that sailboat ride or perfect their rib-smoking skills.

But this normal tendency is compounded by uncertainty over key factors affecting not only economic growth but also war and peace prospects. As of this writing, nobody seems sure about whether or not the U.S. will flex its military muscle against the Syrians, with yesterday's rejection by the British Parliament of any involvement in another "coalition of the willing" seemingly throwing a monkey wrench into U.S. war plans.

To name another, obvious source of anxiety, the economic news coming out over the summer has been mixed, with some slight improvement in the labor and real estate markets accompanied by almost non-existent inflation, and this serves to cloud the outlook for U.S. Federal Reserve monetary policy. With things (as of this writing) looking increasingly shaky ahead of the next Fed announcement on Sept. 18, it remains an open question whether the U.S. central bank will announce any scaling back of its $85 billion monthly bond buying program.

In any case, the Masters of the Universe are expected to come back tanned and sated on Tuesday with a fresh outlook on life, injecting fresh volume and attitude to the stock market dynamic. By that time, we may also know whether or not there will be another major U.S. military action in the Middle East. In the meantime, I'm giving my rack all the smoke it can ingest. It never hurts to be prepared.