A September to Remember
Sep 12, 2011
Posted by Jody Eisenman | Filed under Uncategorized
As a native New Yorker, my favorite sports team has always been the New York Mets. Although recently the team has underperformed, back on 2006 the Mets actually won 97 games to finish with the best record in baseball. As the Mets closed in on their division crown, the management festooned Shea Stadium (the Mets home field then) with the phrase, “A September to Remember”.
Right now, it looks like it might be a September to remember for the stock market, but, not for the same reasons. After the DJIA lost over 500 points in July (a decline of 4.3%), it has now lost an additional 621 points in the first six trading days of September. All told, the DJIA has lost 9.5% in the last few weeks. The S & P 500 is down over 10.3%. The usual culprits are still there: European bank stress, no news from the Fed, no job growth. On Friday, we were faced with the rumor that Greece is once again on the verge of default. Greek Prime Minister George Papandreou said on Saturday he would do whatever it takes to rescue his country from bankruptcy and stay in the euro zone.
Meanwhile, treasury yields continue to drop. Although short term rates are already at rates close to zero (even 2 year treasuries are at 0.17%), now the longer term rates are declining as well. On July 27, the ten year treasury was still yielding over 3%. On Friday, the rate closed at 1.93%., which is an all-time low. The 30 year has declined from 4.28 to 3.26% during the identical period. The flight to quality has been nothing short of astounding. Although I don’t personally feel that lending my money to the US government for ten years at a yield of less than 2% is particularly appetizing, apparently many investors disagree. Volatility in the stock market continues to be high, with the VIX closing at 38.52. Since August 4, the VIX has closed above 30 every single day. To put this number is prospective, the last time before this date that the VIX closed over 30 was July 2, 2010. Although I’m not 100% certain, I do not believe there has ever been a time where the VIX has been over 30 for this many days in a row. Clearly, volatility and low yields continue to rule the day.
