Citigroup Offers A Remedy For The Painful Days of August

by: FP Trading Desk

The market may be suffering in August, but don’t look for much relief in September. It is typically the worst month of the year based on average monthly performance, notes Citigroup chief U.S. equity strategist Tobias Levkovich.

With North American markets in official correction territory – something many not only predicted, but said was necessary – he wonders “how low is too low and what could turn things around?” Better than expected earnings haven’t been able to do it, and more attractive valuations are also getting their chance.

Investors may be waiting for an interest rate cut from the Fed, but Mr. Levkovich thinks this will only help if the U.S. economy holds up. He points to the surprise cut in February 2001, which provided some short-term relief, but failed to turn the tide.

“Thus, a Fed rate cut without some willingness to lend money to small business and consumers would equally end up being in vain,” he said. While August may represent the dog days of liquidity, Mr. Levkovich thinks share buybacks may be needed if the situation is to change.