Labor Day's Origin; Market Update

As we head into the Labor Day weekend, I wish all of you - clients and friends - a safe and enjoyable time off with your family and loved ones.

Labor Day History

Labor Day honors the American Labor Movement and the contributions that workers have made to the strength, prosperity, laws and well-being of the country. 

Trade Unionists first set forth the idea in the late 19th century. The Central Labor Union organized the first parade in New York City in 1882. Oregon was the first state to make Labor Day an official public holiday 5 years later. By 1894, it was proclaimed as a Federal Holiday.

The selection of the date to celebrate the first Monday is September was thought to be contrived to be equi-distant between the July 4th and Thanksgiving holiday, as it nearly is so today.

Today, we think of Labor Day as the un-official end of summer, when vacations end, schools start back, and the seasons weather turns toward Autumn. Sports fans are ready for football games and baseball playoffs. 

Obviously, designating the day as a Monday holiday greatly helps those who work and wish to get away for a 3-4 day vacation. An estimated 30 million American’s will travel this Labor Day weekend, Friday being the busiest day.

In the financial markets, this summer is anything but boring. Many industries and companies are reporting excellent profits, and their stock prices are moving higher. Stocks are ahead 6% to 9% (Dow and S&P 500), while Gold and Bond prices are mixed with the higher interest rates affecting their attractiveness. Gold’s lost about $100 an ounce this year.

Employment is very robust, and unemployment falling rapidly this year to under 4%. This ‘bull market’ with rising asset prices is now the longest on record, commencing March, 2009. 

These times are getting a bit ‘giddy’ in my opinion. One example: the U.S. has legalized recreational use of marijuana in 5 states now: Alaska, Colorado, Oregon, and Washington state. Add Washington D.C. to that list also. Hmmm, maybe that’s why our politician’s are acting foggy and confused? 

Canada will legalize recreational POT in mid-October. Could this all add up to the great fall of Western civilization as we know it? Time will tell, readers.

My question on all of this (mostly) good news is: what will be the catalyst to cause the BULL to stop running? And what will that look like for investor’s portfolios? Rising interest rates along with inflation? Geopolitical events, the trade situation escalating.

The last bear market - in case you missed it - saw prices fall in half from 2007 to 2009; 17 months to be more exact. An equal fall today would take the Dow Jones Industrials Average down from 26,000 to 13,000. I think that’s not likely; but plausible. One last point for long-term investors. If you are disciplined and long term thinking, you can almost always recover from bear markets in decent shape - if you have the time and don't get too antsy.

To wit: If you bought all your stocks at the market high in October, 2007 - Dow 14,000 - and held them until today; you would have gained 7% on average each year.

Sure, that may not make you the hit of the party vs. your friends who own Apple or Amazon shares (or that 'hot' marijuana farm stock), but you can sleep at night by being conservative and diversifying your money across stocks and bonds, and some cash. And that's not a pipe dream.*  

Do have a happy and safe holiday.     

~Barry Unterbrink, C.R.P.C.

* an unattainable or fanciful hope of scheme.