Well the GDP revision #'s came in this morning and wow! 1.6%, how pathetic. ("Anemic" if you want to be PC). 2 years of recovery and a gazillion dollars in stimulus and this is the best we can do?
I pounded the table just weeks ago forecasting this in this newsletter, on CNBC, Bloomberg, etc. and people thought I was nuts. Now look at all the company I have.
It is amazing how the government lowered our expectations so much that the markets were pleasantly surprised and have rallied. Same story, different day: "bad news is good news and worse news is better"...for now!
For the Markets:
Short term: Regardless of the plethora of bad news, stocks are poised to go higher. At the moment, a "Bull" on Wall Street is scarcer than a Yankee fan at Fenway. Sentiment is so incredibly negative and the public is so turned off from the market, that it seems impossible for stocks to drop. Not until we see more complacency among investors, will the market let go.
Longer term: On paper, things couldn't look much worse for the economy. Unemployment holding steady and likely rising, housing taking another turn for the worse, deflation seemingly inevitable and the country taking on enough debt to rival a banana republic.
So why isn't the market getting hammered? Because corporate earnings are good. Companies continue to strengthen their balance sheets and are becoming more efficient. unfortunately this comes at the expense of workers. Eventually earnings will need to rise due to top-line growth (increased sales) and not just cost cutting, but currently investors seem content. Who could blame them with bond, CD and savings rates so low
Investor Strategy:
No one knows when a "crises of confidence" will occur that will send the markets reeling, but it is inevitable.
However, you can't just sit in cash awaiting Armageddon and/or close your eyes with a buy-and-hold (buy-and-hope) either. That will prove catastrophic for long-term financial plans. There are ways to approach this market.
Our strategy of "picking up nickels and dimes in front of the steamroller," which focuses on income and dividends, has been very rewarding. In addition, our biased market neutral approach, which captures the dividends but hedges some of the risk, appears just right for today's environment. Plus, investors must be alert and nimble as there will be a time in the near future when there will be a call for safety, so you must have an exit strategy.
About this Author
Keith Springer, President of Capital Financial Advisory Services a SEC Registered Investment Advisory Firm, providing Wealth Management and Mortgage Consulting Services. For more information on how to build and maintain a solid retirement plan, please contact Keith Springer at 916-925-8900 or keith@keithspringer.com, http://www.keithspringer.com.
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