Fresh Volatility Warrants Caution

 | Aug 21, 2017 | 3:30 PM EDT
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The following is an excerpt from a Stocks Under $10 Alert sent to subscribers on Aug. 21. Click here to learn about this dynamic portfolio and market information service.

As we enter the dog days of summer, which tend to have thinner trading volumes, and get ready for September, historically one of the tougher months for the market, look for volatility pick up. We certainly saw that over the last few days.

Stocks are once again coming under pressure despite a better-than-expected July retail sales report that kicked things off. While some will look to the softer-than-expected July industrial production report, which showed a dip in manufacturing activity offset by a jump at utilities, or a leg down in July single-family housing starts, the real culprit was once again Washington, D.C. Per financial headlines, there is growing concern following the backlash that led Trump to dissolve two CEO advisory groups that Congress and the GOP may be less inclined to work with the president than previously thought.

Pinpointing that were the comments by Republican Senator Bob Corker of Tennessee who said, The president has not yet been able to demonstrate the stability nor some of the competence that he needs to demonstrate in order to be successful.

This of course raises questions over pending tax reform and infrastructure spending as well as other items that were slated to help kick start the domestic economy and spur job creation. In addition, we're seeing mixed economic data and the Fed is poised to embark on unwinding its balance sheet, a likely headwind to the economy.

With a fresh round of uncertainty injected into the market, just as things with North Korea settled down, and prospects for a volatile September (tax reform plan, tackling the debt ceiling and the aforementioned Fed), we're going to remain cautious over the coming weeks. As we do this we'll continue to look through our thematic lens, not only for useful data points, but also for potential new positions as well and signs that we should consider existing ones. In other words, business as usual.

With that in mind, odds are the current political drama is going to slow down the shifts toward food that is good for you, cashless consumption or mobile data consumption. These are structural shifts in consumer behavior that will continue.

There's an old saying that you can't put a genie back in the bottle and another about putting toothpaste back in the tube. Both are true as it relates to these structural changes, and it's why we remain comfortable with our positions in Amplify Snacks (BETR) , USA Technologies (USAT)  and AXT Inc. (AXTI) .

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