Summertime Blues

Presented by the Hardee Investment Group and RBC Wealth Management

Summertime is here, and the market is doing its usual swoon. Long-time investors recognize that May through September usually marks the low for the year while January through April usually marks the high. This summer is no different. In particular, energy related stocks had a very difficult July as oil prices dropped over $10 a barrel. Exxon has dropped over 8% in the last six weeks and 23% since last October. Chevron is off over 14% and 28% respectively. This has been even more evident in the master limited partnerships where the index is down over 12% for six weeks and over 35% since last October.1

In the last three weeks, I’ve listened to over 30 company quarterly conference calls, and for the most part, managements are becoming ultra conservative in their outlooks as they plan on lower oil prices for longer. However, all is not doom and gloom. Gasoline prices are dropping and might even see $2 a gallon this fall. Chemical companies continue to report very strong earnings as their feed stock costs drop. Certain MLPs such as Calumet and Global Partners that use energy reported very strong earnings, and management paints a bright future. However, even these stocks are being treated like the others – shoot first, ask questions later.

Here is where we believe the opportunity presents itself every summer. The Macy’s Red Apple 2-for-1 sale has started. To buy low is never easy, because there is pain associated with it. Again, the themes of energy users, growth over value and cybersecurity haven’t escaped from the summer sell-off. These themes should reassert themselves in the next few months and make for a bright spring as rising earnings should bring rising prices. Therein is the opportunity to cure the “Summertime Blues.”

This article provided by H. H. “Will” Hardee, AWM of the Hardee Investment Group and a Financial Advisor and Senior Vice President at RBC Wealth Management in Houston, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice. RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.*

1. Source: Thompson One quote screen.