September closed with a grand finale for investors, as the DOW and S&P rallied to finish the month basically where it started. Considering that September is historically the worst month on the calendar for stocks, this is a significant victory. There are no shortages of issues that weigh heavily on investor psyche. Solutions to the various problems are neither easy nor quick. What never ceases to amaze us as long-term investors, the Bull Market always seems to charge higher in the face of adversity. There’s still a lot to like with this Bull Market in our minds, while so many seem to still fear it.
There was some new stress to the global financial system this week with rumors that Deutsche Bank was in trouble. Deutsche Bank is by far the largest financial institution in Germany. Germany is the largest economy in Europe. A systemic problem with Deutsche Bank would have a profound impact throughout Europe and the global financial system. Europe continues to struggle economically. The banking system has been challenged. Recently, the US Department of Justice demanded Deutsche Bank pay a $14 Billion penalty for its role in the mortgage market leading up to the Financial Crisis in 2008. That’s a really big number, and under current circumstances, the German bank would have trouble making that payment. The Friday rally was triggered by rumors that Deutsche Bank was going to settle for a much smaller number.
Back at home in the United States, deals continue to take place. This week, news broke that a major Tech acquisition might be brewing, with Qualcomm buying Dutch chip manufacturer NXP Semiconductor. Both stocks jumped on the news. Mergers & acquisitions (M&A) is very positive for the Market. It shows that companies are focused on long-term growth and they still find value in today’s prices. Tech continues to be a big leader for growth. It’s been a stock picker’s market this year.
Now that we have 3 quarters of 2016 in the books, things are set up for an interesting finish to an eventful year. There is so much that is going to happen between now and 2017. Stay tuned for our Fall Newsletter next Friday for our year-end outlook and action plan.
Have a great weekend. We’ll be back, dark and early on Monday.