The clear consensus among investors is that a catastrophic fall in the market is imminent. We all love to focus on the effects of the government and Federal Reserve’s meddling in the economy, most notably a massive 17.5 trillion in debt for the country and another $4 trillion debt held at the Fed. It is truly unbelievable, unfathomable and just downright wrong. I will admit that this danger at our door is not all that far away, so although it might feel like easy street, proceed with caution and have your exit plan ready.
Pessimistic Consensus is the first of the 3 things that will keep stocks going higher. Very simply, stocks do not crash when everyone expects them to. The market loves to ride a wall of worry higher, and this is easily the most unloved rally I have seen in my 30 years in the business. Therefore, our first winner is not going to bring the stock market to its knees, not yet. Not until the other 2 get out of the way at least.
Our 2nd winner that will help propel stocks is Growing Corporate Earnings. Corporate America has become lean and mean, adjusting to the “new economy,” producing goods and services that meet demands of the shrinking consumer base. As I discuss in Facing Goliath – How to Triumph in the Dangerous Market Ahead, the aging 90 million plus baby boomer generation is well past their spending years, while the 65 million Gen X’ers can’t keep up the pace of consumption. This is going to go on for another 5-8 years. Those with money will prosper while those without will languish.
Our 3rd and final victor is Negative Inflation. Negative inflation is very low inflation and not quite deflation, mostly because of the fed’s stimulus money printing programs. A capitalist economy needs a level of inflation, or consumers will stop spending because things will be cheaper tomorrow. That’s what happened in Japan.
Last week both the PPI and CPI came in at 1/10 of 1% gain. It doesn’t get any smaller than that. This is the one that scares the bejeesus out of the Federal Reserve because Inflation is running well under the Fed’s 2% target. Not until inflation picks up significantly will they even think about raising interest rates. We’re a couple of years away from that, but prepare now and have your portfolio invested properly because when inflation finally gets here, it will get ugly!
I have been adding AAPL to our growth oriented accounts. The release of their new products slated for September 9th and the opening of China for their merchandise and services should have a profound effect, and I believe the risks warrant participating in the stock at this price.
Although I believe the stock market will go higher, the risks are rising. Let’s face it, even trees do not grow to the sky. The key, of course, is to be properly invested with a qualified retirement advisor. 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 crushed during the next crash or correction. You can’t replace this money….
…… 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 me a call at 916-925-8900 for a no-cost no-obligation today!