Think last week's 2% decline in stocks was annoying? Get ready for worse.
reason: September is historically the cruelest month in the stock
market. Several potential shockers and market dynamics are aligned to
suggest that this year will be no different.
"Late August through
roughly the end of September is going to be a difficult period,"
predicts Fred Dickson, a veteran market commentator whom I've watched
make many good market calls in his role as a strategist at Davidson, a
"We have a convergence of perfect-storm factors," says
Dickson. They include the age of the current bull market, investor
complacency, signs of consumer weakening an imminent change in
Federal Reserve strategies, unrest in the Middle East and budget
bickering in Washington.
Dickson predicts that major U.S. indexes
will fall roughly 5% to 6% from their 200-day moving averages, a common
support point in pullbacks. That would be a drop to around 1,554 for the
Standard & Poor's 500 Index ($INX) and 14,376 for the Dow Jones Industrial Average ($INDU). But pullbacks of 10% are common in corrections for bull markets as powerful as this one (up about 19% this year alone).