Smart Money with Keith Springer Saturdays at 1PM and Sundays at 6AM on NewsRadio KFBK 93.1 FM and 1530 AM

Keith Springer’s Smart Money Newsletter 07312014

To learn what’s going on in today’s world with the economy and financial markets, in plain English, and too see where stocks and bonds are headed be sure to watch this brief video update.

Hi. I want to give you a brief update on what’s going on in the world. There’s a lot happening, a lot of economics, a lot on the market. So, let’s sort of recap it and why all the volatility is coming back. A lot of people are nervous here. It is quite a bit. We obviously have a lot of international tensions which are affecting the markets. The only real one that is going to be a concern is Russia if we have a new Cold War. I don’t see that happening. There’s certainly not going to be a real war with Russia. But, it is going to create a lot of tension in the marketplace until we sort of get that resolved, not enough that it’s going to affect long-term investors, but it is an issue. The real problem, real issue, real push me pull you so to speak is the economics, the market, the economy. The Fed is sort of caught between a rock and a hard place. It’s seeing some economic growth. This morning, we saw GDP go up about 4%, a little higher than expected, which was nice for the economy as a whole, but the Fed still sees weakness. They reiterated that they’re not going to raise interest rates any time soon. That was critical. That should keep the market from crashing, really pulling back hard.

What we’ve recently in the last couple of weeks, of course, has been earnings. And sort of the concept, the overall trend of the last six, seven years has been the market goes down right before earnings. Earnings tend to be better than expected. It goes up towards earnings and during earnings. Then, we typically get a sell off right after earnings. That’s what I call sort of the post-earnings nap or the post-earnings slumber. That I think, unfortunately, is what we’re going to see for the next four, five, six weeks. It is that time of year. Hey, we’re in the middle of the summer doldrums. Earnings are just ending. Now, the focus for most people in the headlines especially even in the economic world is going to be on the headlines. We’re going to start to see more of Russia. We’re going to start to see things about China, the rest of the world. Without earnings, people tend to focus on the international events. Even though they don’t really affect the economic events, I do expect sort of a mild pullback over the next four to six weeks. We are due for a correction. I would actually welcome a 10% correction. Our portfolios are designed for that. But, I do think we’ll have a pullback and I am expecting a fairly strong fourth quarter.

A lot of people are asking, “When’s the next shoe going to drop?” You just never know. If interest rates start to rise next year, very likely we could have that bear market or major correction sometime next year. Believe me, it’s something that is normal. Whenever we have a bear market, you know, even trees don’t grow to the sky. Bull markets always end. We have bear markets for six to twelve or eighteen months. They are very normal. They are no fun, but they’re very normal. And they are welcome because they’re needed to consolidate gains. So, in the short term, earnings are over. A lot of focus is going to be on the international situation on the headlines. Expect a little bit of a pullback. In the longer term, our portfolios are designed for that. For the intermediate term, they’re not taking a lot of risk, but designed to get good participation on the upside without all the downside. And I expect the fourth quarter to be fairly strong. Earnings were really good this quarter. If they continue to accelerate into the fourth quarter, then we’ll see stronger earnings.

So, overall, this is not a time or an opportunity to increase risk. In the immediate term, certainly reduce risk. And, you know, this bull market is getting very long in the tooth. We got to be careful, which is why we always invest for need not for greed. Always get the best return that you need, but with the least risk possible. So, always make sure that you’re adjusting and prepared for what’s out there. Thank you.

Keith Springer

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