In reading the financial news today and for the past week, there is not much worthy for comment except that trading volume was low for stocks and there are few if any positive signs for the US economy. Many people are on vacation.
Sept. probably will be a difficult time for the US stock market as investors begin to assess the full force of the extremely weak labor market and related issues.
As a final note, the bull market for bonds means that many view debt as a safe haven and a better investment as compared to stocks. In theory, using bonds as a means of business financing is less flexible. The poor returns of the past decade for long-term stock investors is part of the reason bond demand remains high in the face of new issues to finance the budget deficit.
Overall, I think American business productivity will suffer if investors undergo a shift in psychology and prefer bonds. The never-ending supply from the US government also helps to shift thinking about investments in debt rather than equity.
Finally, a shift to the debt market might result in a structural change in P/E expectations for stocks. This is not good for equity prices!
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