Friends
Wow, what a crazy day. A car trying to ram a White House gate, shots fired in front of the capital, the women driver shot, and a baby in the car. As of this writing this is what we are hearing, but add this to the other political craziness in Washington D.C. and it’s a lot to handle for the markets. Once again, the day began with traders heeding the dire tone of the President and Treasury Secretary Lew with regards to the coming debt ceiling showdown, as stocks spent the day in negative territory. It seems to us that this pattern is recognizable from past showdowns. The politicians seem to get more focused when the markets start to tank.
For the day, the Dow Jones Industrial Average was down 136 points to close at 14,996. The S&P 500 was down 15 to finish the day at 1678. Gold was down $2 to trade at $1318 per ounce, while oil was down $1.04 to trade at $103.06 per barrel WTI. The S&P did hold the 1670 support level in early afternoon trading, but the bulls will be hard pressed to hold onto that level if the political environment continues to be heated.
There is likely to be a lot of volatility until the political theatre subsides, and likely quite a bit afterwards too. We’ve seen this pattern before. Traders go on a buying strike until the politicians decide to play nice. Once things are “settled” stocks recover and the focus can turn to earnings and economic data. For a little historical perspective, during House Speaker Tip O’Neal’s tenure, there were 12 government shutdowns. Of course, Speaker Gingrich and President Clinton had two. We will get through this. We’ll do our best to keep you informed, but I want to reiterate once again, that don’t let this short term nonsense affect your long term investment plan.
Have a nice evening everyone.
