It's been well over 100 degrees in my neck of the woods these past few days...and I'm not really having all that much fun. Central air conditioning is something I'm lacking.
If I could just direct this heat onto Wall Street...where it is needed...I would be a lot happier.
But that's not about to happen any time soon. And that's not because I have some inside track on the market. It's because my crystal ball reminds me that it's summer; plain and simple. Well...there are a few other factors tossed into the mix.
If you've played the market for any length of time you know that the summer is never an easy time for penny stock investors.
And the toasty summer of 2006 is no exception. With the added joys of a potential economic slow down and an always tough third quarter coupled with ongoing tensions in the Middle East and tropical storm Chris gaining steam...penny stock investors have a lot on their plates.
In a nutshell...summer is not typically the greatest period for penny stock investors. And you don't need to pay a Wall Street analyst to tell you that.
July, August and September are traditionally the worst months of the year for stocks; thanks in part to holidays and less money moving in and out of the market. I also read recently that it's a time when corporations and analysts take time to revise their full-year forecasts.
"Plus you have the confluence of rising rates, rising energy prices, the events in the Middle East, the consumer getting squeezed, the decline in the housing sector and the effect of a four-year presidential cycle," noted one money manager.
The cycle, tracked by Standard & Poor's and other market researchers, suggests that the stock market often follows the four-year cycle of the Presidential term; with year two (2006) being the weakest of the four.
One large-cap money manager recently commented that the stock market's biggest challenge now is the interest rate issue. After 17 straight hikes since June 2004, the Fed fund rate currently stands at 5.25%, up from a level of 1% two years ago.
She further noted that at this point in the cycle, more rate increases are putting pressure on earnings and calling into question economic growth. All of which sets up an environment that could be tougher on stocks.
Still, penny stock investors could continue to see this recent down trend as an opportunity. Because stocks that look like a deal right now...may not be such a screaming deal in a couple months. So, you can either take a measured lead...or follow the herd.
