Thinking back as a youngster I disliked that feeling of fall approaching, when the days were still very warm, but the nights cooler. That chill in the air was a reminder that school was fast approaching and the good times during the summer season were coming to an end. Fast forward to today and the cyclical good times seem to be coming to an end for the markets. That slight chill in the air now reminds me of all the historical volatility where the months of August, September, and October have a lot of negative history for the market.

The Federal Reserve wraps up their unprecedented bond buying of $1 trillion per year in October. The good news is the U.S. Budget Deficits have shrunk greatly to somewhere around $550 billion, and is now a more reasonable size as a percentage of GDP. With the Federal Reserve buying $1 trillion of bonds a year it covered the new bonds that needed to be issued, and left a lot of free money to filter its way into riskier assets like stocks. The bad news is that the U.S Government will need real money, not printed money, to fund new bond issues.

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PVG – Equity Income Monthly Update (August 2014)