August stock gains may not hold in September
Unemployment is expected to top 10 percent before the end of the year. Commercial real estate markets may be the next thing to implode the balance sheets of the nation's financial institutions. Cash for Clunkers boosted the automotive industry prompting the Big Three and its competitors to do something unthinkable even a few months ago -- recall laid off workers and increase production. But hope for a better tomorrow is what keeps Wall Street humming. Following the recent tumultuous market, any gains are lapped up by shell-shocked investors too frightened to even open up their brokerage statements. August's performance was not good enough to answer the skeptics nor bad enough to shatter the faith of the optimists who have been pushing returns up since March. Both the Dow Jones industrial average and the S&P 500 squeezed out gains of about three percent. The tech-heavy Nasdaq Composite Index gained 1.5 percent.
Steve Bleiberg, head of global asset allocation at Legg Mason Inc. (LM), is none too impressed. "We have been kind of trading sideways," he said in an interview with DailyFinance. " The drop in earnings has probably run its course. We are in a bottoming process."
Many pundits have predicted that the economy will climb out of the recession in the second half of the year. Bleiberg, though, urges investors to keep their expectations modest about any economic recovery. Some experts have cautioned that many people will not notice any difference -- at least at first.
"So far they (economic data points) not even coming close to where they were a year ago," Bleiberg said. "There is a huge amount of ground to be made up."
By the time of the collapse of Lehman Brothers last year, investors were already in a bear market. Housing, though getting better, still continues to struggle as many cash-strapped homeowners with modified mortgages have trouble making their payment.
More bad news may be coming in September.
"September is historically the worst month for U.S. stocks, with the benchmark index losing 1.3 percent on average since 1928, according to data compiled by Bloomberg," according to the news service.