Published September 10, 2012
Since the overall market, as measured by Standard & Poor’s, is up over 13 percent for the year, over 10 percent since May lows and more than 2 percent in August alone, cautious optimism has emerged.

However, political risk hangs so heavily over markets globally, it is hard to be anything but worried. Furthermore, September is a notoriously difficult month for stocks. Expect more turbulence.

Globally, economies are slowing. Even Germany, which has been the bulwark of the European economy, has slowed as Europe sinks into a recession. In Asia, much uncertainty prevails as China, the key driver there, sees its economy slowing.

In the U.S., signals are mixed. Factory orders are reported stronger than expected. Consumer confidence, as measured by the University of Michigan index, also is surprisingly up.

Durable goods manufacturing is up 9.8 percent year over year, with durable goods sales and orders both up over 14 percent. Factory order backlogs are 14.4 percent. New housing starts are up 29 percent, and new housing building permits are up 29 percent year over year.

The big three automakers mark double-digit sales gains in August year over year. Productivity increases to 2.2 percent up from expected 1.9 percent year over year.

But other measures, such as the purchasing managers’ index and the construction index (which includes government construction), show declines in July and August. And a serious drought in the Midwest threatens farmers and farm-related industries.

With the mixed tone, one can be wary of the U.S. economy – especially factoring in the political risk. As the election nears, the outcome is still very much in doubt. At this juncture, President Obama is probably […]