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Opening Statement from August 2014 Dividend Gems

First published on August 18, 2014 for subscribers to Dividend Gems

In line with our expectations, US second quarter GDP came in at 4.0%, well ahead of the 3.1% consensus. Moreover, first quarter 2.9% GDP contraction was revised upward to 2.1%.

Over the same period the US received upbeat jobs and manufacturing data, along with a continuation of positive PMI data from China, India and Taiwan. Thus, when taken together, one would expect the US stock market to continue its bullish momentum. However, the market began to sell off by the end of July.

As discussed in the June Market Forecast, the recent market selloff was not unexpected. We actually provided accurate buy-in levels. The only thing that was a bit surprising was the lack of definitive catalyst causing the selloff.

In the July and August Intelligent Investor, we stated that we felt investors were searching for any reason to take profits due to valuation concerns. Accordingly, by the end of July investors used the latest geopolitical events as an excuse to push the stock market lower. To rephrase this point, geopolitical events were not the real reason for the market selloff, but served as an excuse for investors to take some profits due to valuation concerns. This notion was confirmed recently by the market rally in the face of the same geopolitical events which have not yet dissipated.

As it turned out, we nailed the market bottom in advance. Just over one week later and the stock market is hovering around previous highs. But again, we are seeing the market move in opposition to economic data. For instance, as the stock market continues to rally, more recent data indicates further