August Market Update for 2019

Market Condition: The current market is in an uptrend. After spending most of August in a somewhat volatile correction, the
S&P 500 index is once again attempting rise above the 3000 level. The S&P 500 has spent most of August bouncing between the
2800 and 2900 level. On September 5th, the S&P 500 and the Nasdaq composite index staged convincing gap-ups to the upside
on strong volume overcoming recent resistance (the 2900 level for the S&P 500 and the 8000 level for the Nasdaq composite).
The 3000 level will now be the next area for the S&P 500 to overcome, at which point it will give us some technical input if this
market wants to run higher or if it will continue to muddle around at recent levels. Widely held names such as Amazon
(AMZN), Facebook (FB), Apple (AAPL), Adobe (ADBE), Microsoft (MSFT), and Alphabet (GOOGL) are forming the right sides of
their respective bases (consolidations), whereas stocks such as Visa (V), MasterCard (MA), Global Payments (GPN) are already
hitting new highs. The Philadelphia Semiconductor index (SOX) is also nearing new highs. The above observations is what one
typically sees in a market which is emerging from a short term correction. These are not the signs of a bear market. A handful of
homebuilders are also hitting new highs – the best recession ever!

Recent Headlines: There is not enough space on this page to include every dire headline out there. But it would be fair to say
that the market has been in a reactionary mode: reacting to every Presidential tweet, tariffs, impeachment, climate crisis,
rockets, rioting in Hong Kong, interest rates, recession fears, yield curve inversions, and Brexit. If these headlines were accurate
in forecasting the doom to come, we would not see the type of price action noted in the above Market Condition section. The
market is a forward discounting mechanism that processes all this information and reacts accordingly. You may have noticed
that the above headline bullet points are not “new” this has been going on for a while, as we have been mentioning them for
months. Indicating once again the market has priced in this dire “news.”

The Economy: The one data point that put a kibosh on recent economic numbers is the ISM Manufacturing Index for August
which came in at 49.1 (levels below 50 indicate contraction). No reason to get too negative on one data point keeping in mind it
is a survey which most likely was affected by negative trade sentiment. It is more important to take the bird’s eye view and the
longer term trends, which for now are very robust. The ISM’s reading signaled contraction, not recession. The index would need to fall a lot further to be in recession territory. We’ve seen this indicator signal a slowdown many times over the course of the current expansion—for three months in 2012, once in 2013, for five months in 2015 and once again in 2016. The August data confirms that tariffs and trade uncertainty have slowed activity in the manufacturing sector, but it does not signal that a recession is fast approaching. Board Leading Economic Index (LEI) for the US increased
0.5% in July pointing to moderate growth in the second half of the year. According to the Conference board, “Housing permits
unemployment insurance claims, stock prices and the Leading Credit index were the major drivers of the improvement.
Manufacturing and yield spreads exhibited weakness.”

Summary: As mentioned in the Market Condition section above we have a positive technical situation in the market. This
technical picture is supported by sound fundamental economic data such as the lowest unemployment rate since the 1960s,
strong job growth, and accelerating wage growth. Credit spreads remain low, which indicates liquidity is plentiful, this is an
excellent indicator of market liquidity and economic health. Retail sales hit an all time high in July. The Chicago Fed National
Financial Condition Index is pointing to a “more favorable condition” which indicates high confidence and trust in the economy.
The recent turmoil and correction offered an opportunity to buy stocks, for now we are investing in stocks.


“Your ultimate success or failure depends on your ability to ignore the worries of the world long enough to allow your
investments to succeed. It isn’t the head but the stomach that determines the fate of the stock picker” – Peter Lynch