08/27/2007

Where have all the doldrums gone?

Hello:

In the past, the trading sessions between Memorial Day and Labor Day were significant in their lack of significance. Mimicking the summer weather, the domestic equity market would slowly climb through the summer months in a lazy fashion marking the summer doldrums. Traders would escape the city heat to the Hamptons or to the Jersey Shore, and investors would catch their breath during a well deserved summer vacation.

No longer. This summer we have seen markedly increased volatility in the domestic stock market as measured by the CBOE Volatility Index (VIX). In June, July and August of 2004, 2005 and 2006, we see that the VIX traded just above or below 15. This year, it appears that the mean will be closer to 20 for June, July and August.

What is causing this lack of doldrums in the summer? We believe that the global economy has reduced the effect of New York Summer weather on the domestic equity market. In fact, for our traders down under, it is winter weather. Who in Melbourne cares about the Hamptons?

One could make the argument that the lack of summer doldrums is evidence of a trend of decreased seasonality in the future for domestic stock markets. Therefore, it will probably become increasingly important going forward to not wait for buying opportunities, but rather to dollar cost average into an asset allocation to help smooth out the somewhat random gyrations of investments.

Our offices will be closed on Monday in celebration of Labor Day. Have a happy and safe holiday!

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager