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What's in store for August ?

After having best month in a year, one starts wondering - what's in store for August for markets ?
There are quite a few positives for markets to keep on inching towards DOW 11000 over next 5-6 weeks. Here are some of those:

  • European mess seems to be over at least for now with Euro over $1.30, I am sure Europeans would enjoy their summer holidays in August
  • US GDP growth came in at 2.4 % which is lower than expected but much better than sub-par recovery (with growth of less than 1%) and puts "double-dip" fears at rest (for now)
  • Company earnings came out much stronger than many have expected across the world - this bodes well for second half
  • Shippers (Fedex/UPS) have raised their full year earnings guidance and these are best companies for understanding economic activity across the world
  • Many emerging markets (except China) are trading near their YTD highs - good for developed markets to catch up 
So for now, except unemployment report which would be out next Friday, many signs to be positive. Hence markets keep its upward bias.

My last week's recommendation A123 systems (AONE) did very well. If you missed that, there is one more company called Erer1 (HEV) at around $3.3 which is good proxy for all the excitement which is going on with electric cars.  One should also start looking at some of the European banks like LYG ($4.3) or IRE ($4.4). Now that stress test results are out and both these banks "passed" the stress tests, they provide a good way to invest in Europe and could potentially return 30-50% or more in next 18 months

Have a great week ahead !

/Shyam

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