For the last few months I have been saying how positive it looks for many U.S. companies. So why has the stock market done so poorly? Not only is it down for the last few months, but market volatility has gone through the roof with 100 point swings a daily occurrence. That’s a big deal if you are retired or planning for it!
The positives, such as lower oil prices, a strong dollar, rapid technological and biological advances and sustained low interest are still in place. It’s just the speed at which these occurred that has spooked investors.
There is no doubt that the Euro and the yen have fallen so sharply vs. the U.S. dollar due to their massive stimulus programs. This is hurting the earnings of multinationals when translated back to dollars. However, stronger earnings going forward is still very much in place; it’s just being affected by the currency conversion. This type of negative effect is far more welcome than lower earnings stemming from decreased demand and a recession.
Another big time factor is the complete collapse of the price of oil. Again, it happened so fast and was so unexpected, that it too is having a sudden influence of earnings. Yes, there will be casualties such as layoffs in the new Domestic oil heartland. However, the $1.2 trillion windfall to American consumers will be a boon for domestic demand and consumption and come at the perfect time to offset the stronger dollar,
Therefore, once things moderate and everyone gets their panties out of a bunch, I expect the market to rise to new highs, albeit with much more volatility and risk. The wild card is the Fed and interest rates.
I called it dead on and stood alone in Facing Goliath – How to Triumph in the Dangerous Market Ahead, as I predicted DEFLATION and low rates would permeate, not inflation as everyone and their had mother expected.
The 10 year treasury is now 1.6%, almost at my 1.5% target and probably heading to 1%. Therefore, there is no reason for rates to rise. Yet I fear the Fed raising the fed funds rate slightly just to “see what happens.” That would scare the bejesus out of investors and send the market plummeting. Thus all the more reason to always “Invest for need, not for greed” and take the least risky way to achieve your objectives.
The increased volatility could be an early warning signal that a bigger drop could be coming. However, none of the other indicators are currently showing such and I don’t expect one, but it’s my job to always be paranoid and prepared. We are way overdue for a normal sizable correction and or bear market.
The key is to be invested properly with a qualified retirement advisor and have a plan for the good times as well as the bad. As you get older it’s harder to replace this money…unless you don’t mind working forever. If you are retired or close to it, “how much can I make” is replaced by “how much can I afford to lose” or “how much do I want to lose.” This will ensure you are looking at the big picture and getting the returns you “need,” but with the least risk possible, so you don’t get hurt too badly, or at all, when the market turns down again.
…… and that’s where we can help. To learn more about The Springer Investment Approach, which is our powerful proprietary Investment Management Strategy designed to manage risk and deliver returns in any market, or to get a free second opinion on your portfolio, simply reply to this email or give us a call for a free consultation today.