Our Expectations for 2012

19 01 2012

Jonathan N. Castle, CFP, ChFC

2011 has come and gone and we are rapidly working our way through 2012.  It seems that so far, a general sense of cautious optimism has taken over where only a few months ago, all we heard was gloom and doom.  We applaud what appears to be slightly more balanced reporting on the economic front.  While not all of the news is good, neither is it all bad as it seemed to be several months ago.  A sense of doom and gloom serves no good purpose for our economy, and we are pleased the mood appears to be lifting somewhat.

After reviewing a great deal of economic analysis and often conflicting opinions from our research providers, we have come to some general conclusions about what to expect for performance in the financial markets in 2012.  We have stated over the last several months that we are “cautiously optimistic,” or “moderately bullish.”  There is no substantive data that suggests we should change this outlook (details at the end of the article) – but that does not mean that we believe the road ahead to be easy, particularly for investors.  Nor does it mean that we are wearing rose-colored glasses, or our cups are always “half full.”  It simply means that we believe we will continue to improve – with occasional interruptions – from where we currently are NOW.  We also believe that it will take years for the economy to fully recover – but recover it will.

Our Major Concerns at this time are:

European Debt Crisis and Likely European Recession – Some experts believe that the European recession has already begun. Recent data points indicate that Germany’s economy contracted slightly last quarter, and it is likely that other economies will soon follow.  As we enjoy a globally integrated economy, European recession likely means slowing economic growth in the US and difficulty in achieving meaningful returns in international markets.

Rising Dollar – As the Euro weakens, other currencies, (including ours) strengthen against it.  A strengthening dollar makes it more difficult for US companies to export goods and may make it more attractive for US companies to outsource jobs overseas.  However, a strong dollar does have the benefit of making US debt more attractive to foreign investors looking for security.

Political Stagnation – The past 2 years have been a display of an embarrassingly dysfunctional government. Unfortunately, with 2012 being an election year, we believe it unlikely that any real policy change will occur until 2013 or beyond.

Overwhelming US Debt – this may be the most dangerous long-term economic issue we have to face. At some point, we must face the inevitable belt-tightening that will be necessary to keep the US afloat.  Either government spending must decrease, or taxes must increase – or both.  Neither option is good for the economy or financial markets.

The Fed is Out of Bullets – The Fed has reduced interest rates to the lowest that we have ever seen, and pumped trillions of dollars into our economy trying to stimulate economic growth.  However, the damage done to the economy during the Great Recession was so severe that most of the Fed’s actions served only to limit damage – not to create the opportunity for recovery that we were hoping for.  At this time, it appears that the Fed is nearly out of ammo and has few options left.  Fortunately, inflation has not been severe; if it were, the Fed would be forced to raise interest rates again, which would slow economic growth even more and investors holding bonds would see the market values of their bonds decrease.

US Consumer Belt-Tightening – A large part of our economy is based upon the American consumer.  While it is a bit embarrassing to say that our economy runs on us buying things we don’t really need – it is partly true.  As more Americans learn that they can, in fact, live without many of these luxuries, these dollars no longer stimulate the economy.  On a personal level, a reversion to thrift is positive and one that we wholeheartedly support.  On an economic level, however – especially as a service based economy, consumer thrift forebodes even slower growth than previously hoped for.

Rays of Hope and Sunshine

Receding Unemployment – ever so slowly, and certainly not in a straight line, unemployment figures are receding. This is a fact; there are jobs out there to be had.  Many are in small businesses where people are hired one at a time.  Some disbelievers say that unemployment is dropping “only because discouraged workers have given up looking for jobs.”  This argument is hogwash – new workers enter the job market on a daily basis, which offsets discouraged workers leaving or retiring early.  While the jobs may not be the premium top paying jobs that were available before – they ARE indicators of economic expansion from where we were two years ago.

Increased Home Sales – According to the most recent National Association of Realtors (NAR), housing sales appear to have stabilized.  Total housing inventory fell from an 11 month supply to a 7 month supply during 2011. Housing starts and permits are increasing, albeit slowly.  As the housing sector directly impacts over 17% of the entire US economy, this news – however tepid – is hopeful.

US Corporate Profits – US corporate profits are at a high not seen since before the tech-bubble crash.  While much of the profit results from cost-cutting, it is still meaningful. Increasing profits mean that most of the major US firms are on a solid fiscal footing, and are in a much better position to pay attractive dividends to shareholders and fund future expansions.  From a yield perspective – high quality stocks are now more attractive than bonds at current levels.

Improving Manufacturing Data – The December Manufacturing Institute for Supply Management (ISM) Report topped expectations with the factory sector barometer (known as the PMI) increasing to the best level in six months. The raw data of the PMI also indicates that the manufacturing sector has grown for 29 consecutive months, which is generally a good indicator of the future direction of the economy. ALL 3 major US automakers reported profits for 2011.

What to do?

“Buy Low, Sell High.”  We all know this.  Yet, many people are only comfortable investing when the economy is humming along smoothly and all the news is positive.  Unfortunately for these emotionally driven investors, periods of economic boom are often the most dangerous times to invest, because by then, markets are usually overvalued. (Buy High, Sell Low).  Remember – when everyone is already invested, there are no new investors to bid prices up further.  Being invested in portfolios designed to your personal risk tolerance – especially when markets are undervalued – has been proven to be a key to long term investor success.

Typical Bear Market Behavior

For the last 100 years, based upon a study done by Morgan Stanley in 2009 called “The Aftermath of Secular Bear Markets,” major bear markets typically behave as follows.  (Dates for our current bear market in parentheses).

  • Market Crash/Bear Market: -56% for 29 Months, on average (Oct 2007 – Mar 2009)
  • Rebound Rally: +70% for 17 Months, on average (Mar 2009 – Apr 2010)
  • Mid Cycle Correction: -25% for 13 Months on average (Apr 2010 – Aug 2011)
  • Trading Range: Sideways (but slightly UP) with 15-20% whipsaw behavior for 5.6 years, on average (Aug 2011 – ?)

Our current bear market appears to be slightly shortening the cycles, but, in light of current political dysfunction and the European Debt Crisis, we believe the “trading range” portion of the market cycle will likely last several years at a minimum.

For 2012, we believe the following:

  • Markets will continue to be choppy, sometimes uncomfortably so
  • We DO expect to see some growth out of stocks, but not particularly impressive growth
  • Larger, dividend paying stocks should play a large role in the equity portions of portfolios (as compared to mid- or small-cap stocks)
  • US markets will be less volatile, and return more, than developed international markets. Emerging Markets will suffer from the European recession.
  • Interest rates (and bond prices) will remain relatively stable
  • The US Dollar will strengthen compared to the Euro

Our suggestion is that investors focus on other issues over which they have control:

  • Maximize IRA, 401(k), Roth, and other retirement plan contributions.
  • Reduce debt wherever possible.
  • Cut back on unnecessary luxuries (cook at home more, examine utility bills, etc).
  • Examine opportunities for mortgage refinance or other strategies to lock in low interest rates.
  • Closely examine your tax strategies (Roth Conversions, capital gains realization, business sales, etc) to include the expectation that taxes will be higher in future years.

While this list is certainly not exhaustive, it is a good place to start.  If we can offer you assistance in making the decisions necessary to maximize your odds of success during these uncertain times, please don’t hesitate to give us a call.

This blog article is for informational purposes only and does not constitute legal, tax, or personal financial advice.  Please consult your own financial professional for personal, specific information.  PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by Paragon Wealth Strategies, LLC., a registered investment advisor.  http://www.WealthGuards.com

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Should I Still Invest in a Crappy Economy?

20 09 2011

By Jon Castle, CFP®, ChFC®

It does not seem to matter who the potential investor is – whether they are already retired, are nearing retirement, or are a younger person with quite a bit of time until retirement… the question is often the same.  With interest rates being so low… with the markets unpredictible and volatile – what should I do?  The questions aren’t even really so straight forward as, “why should I invest my money now,” or “should I pay off debt first,” or even any of the other questions that, as a financial advisor for more than 15 years now, I’m used to getting.  The questions I am hearing now seem to have taken on the tone of confusion, despair, and a lack of direction, versus the questions I used to get such as “how should I invest,” or”what type of account – a Roth or a traditional IRA – should I have?”

Yesterday, when talking to a rather successful, nearly retired client on the telephone, she mentioned that she feels that she always has to take two steps backward for every three steps forward, and ideally, she would rather not see her account fluctuate at all once she retires next year.  “Isn’t there just something we can do with our money to earn a steady 6-8% or so with no risk?”  Unfortunately, the answer is NO.  While there might be many product salesmen out there who will try to convince you otherwise – the answer is still NO.   If there were -then all the institutions and large organizations in the world, who spend millions and millions of dollars trying to find or design such assets would have already found them.  A classic example of people and institutions trying to get outsized returns with no perceived risk is the recent mortgage debacle, and we saw how that turned out.

So – back to the original question – With the Economy on shaky footing (to say the least) and with the markets being… unusually volatile, to put it lightly – what should I do?

To answer this question, I had to turn to the history books, tenured academic research, and even some new research – but I think I found the answer.  Do EXACTLY what you have been told to do throughout the years.  Live below your means – save a portion of your income (assuming you are working and saving for retirement) and invest in a fully diversified portfolio designed specifically for your risk tolerance.  In fact – it is having the GUTS to invest during times like these that separate the winners from the… folks who wish they had as much money as the winners.

Last year, Dimensional Fund Advisors tapped into the database held at the Center for Research in Security Prices (CRSP) at the University of Chicago – the nexus of more Nobel-Prize winning research in economics than any other institution on the planet – to identify IF there was a direct correlation between a poor economy (as defined by low GDP) and poor investor returns.  In other words – SHOULD I STILL INVEST IN A CRAPPY ECONOMY?”

The Dimensional Study started by taking all of the world’s developed economies, examining their annual GDP growth from 1971 – 2008, and dividing them into two groups – High Growth, or Low Growth – for each year.  Clearly, much of what we hear on the news is about GDP growth – is our economy growing or not?  The higher the economic growth, the better – as this means reductions in unemployment, increases in personal wages, and, generally, a feeling of well-being, versus the cloud of general malaise that seems to have decended upon the world as of late.

Once the economies were divided into High Growth and Low Growth – the performance of their stock market indices was compared to their GDP Growth.  The question:  Does a poor economy (low GDP Growth) accurately predict poor investor returns?  The question was not – can an investor perform poorly during low-growth times (of course, we know that is possible) – but is there a clear and determinable correlation between a bad economy and a bad investor experience?

Oddly enough – the answer is NO.

                              AVG GDP                      AVG RETURN              Risk (Std Dev)

High Growth               0.92                             12.90%                          23.07

Low Growth               -4.02                            13.52%                          23.04

The data for Emerging Markets was similar, but quite honestly, the data for Emerging Markets only went back to 2001, and I felt this was just too short a time period to draw any reasonable conclusions.

When I first saw the data, I thought… well… this might be a sales pitch just to keep investors invested… we are still looking back only as far as 1971.  What about other periods of lousy growth?  And what about for the US in particular?  I wanted to check the data myself.  So, I delved into the CRSP database myself, using the French and Fama indices that go back as far as 1926, and to the Bureau of Economic Analysis (BEA.GOV) and compared hypothetical investor returns to the GDP growth (or lack thereof) during the 1970’s and during the Great Depression.

One particular period of interest to me was the years from 1972 to 1982.  Yes, this was after 1971, but I wanted to look at it further and in more depth from a portfolio manager perspective instead of just looking at the stock market.  How did it feel?  Remember the oil embargo?  Our defeat in Vietnam? The Cold War?  Carter’s “Misery Index?”  Double Digit Inflation?  During this period of time, the average GDP Growth was only 2.7% – well below the historical average of 3.4%.

The second period of interest was the period of the Great Depression.  Now the Great Depression itself lasted from 1929 to 1941 – but for this particular exercise, I wanted to look at the period starting about 2 and a half years AFTER the crash – starting with the summer of 1932 until the attack on Pearl Harbor, or December 1941 – the long, grinding years of the Depression.  During that period of time, our average GDP Growth was only 2.0% – the longest and weakest period of below-average growth on record for the United States.

My question was – how could today’s investors, using a properly designed, diversified portfolio,  have done during that time?  Were these two periods of time – arguably the worst periods (economically) in the past hundred years – a bad time to be invested?

Assume a relatively simple, domestic portfolio:  T-Bills (15%), 5-Year Treasuries (15%), US Large Stocks (11%), US Large Value, or underpriced, dividend paying stocks (21%), US Small Value Stocks (18%), US Small Stocks (10%), and Very Small, or Micro-Cap Stocks (10%).

Looking at the indices only (remember – there were VERY few mutual funds at the time of the Depression, and certainly no ETF’s,) we can get an idea of how an investor might have done.  The following numbers do NOT account for any fees, commissions, taxes, etc – but we can still draw conclusions.

From the period of 1932 – 1941, the above, simple, diversified portfolio (indices only) would have achieved an AVERAGE ANNUAL return of… wait for it… 19.29%!!  In fact one dollar invested as described above in the summer of 1932 would have grown to about $4.50 by December of 1941.  During the Great Depression!!

From the period of 1972 to 1982, the above, simple, diversified portfolio (indices only) would have achieve an AVERAGE ANNUAL return of… 14.82%!!  One dollar invested as described above in December of 1972 would have grown to about $3.49 by December of 1982.  During the Carter Years and the Misery Index!!

Were there periods of volatility, market corrections, and even stagnation in the investor’s portfolio?  Absolutely – in particular, a sharp market correction in 1936 would have scared out many undisciplined investors, and a particularly unpleasant 18 month bear market from 1973-1974 would have tested investor mettle.  But the facts remain – a fully diversified, properly balanced investor would have been able to achieve significant returns during those times.  In fact – there are a number of economic theories that suggest that investors who have the GUTS to invest (and remain invested) during these uncertain times are the ones who enjoy the GREATEST rewards.  These are the riskiest, most emotionally draining times to invest – as a result, the Capital Markets reward those investors more readily and more predictibly than the comparatively “timid” investors who only remain invested during the “good” times.

Today, the Fed and the International Monetary Fund (IMF) are projecting the US economy’s GDP growth to be about 2.7% for the next two years.  The media harps daily on the miserable shape of our economy, and politicians are using the economy as opportunities to further their agendas.  These are things that we must endure as a people, or change with our votes.

However – it is critical to SEPARATE our concerns about the economy – from our own INVESTMENT POLICY.  The two are NOT necessarily correlated.  A miserable economy – historically – does NOT mean miserable returns for an investor who is disciplined, creates a sound, diversified, low-cost investment STRATEGY with strict risk controls, and then implements it with courage and discipline.  In fact – it is EXACTLY these types of investors who have historically been the winners over the long term.

___________________________________________________________________________

This blog article does not constitute legal, tax, or personal financial advice.  Please consult your own financial professional for personal, specific information.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by Paragon Wealth Strategies, LLC., a registered investment advisor.





YABBUTS: “Yeah, but…”

27 10 2009

CastleInternetPhotoTiniest

By Jon Castle, CFP®, ChFC®

I got up this morning and turned on one of  the financial pornography channels as usual.  I won’t say which one it was, but, as a financial advisor and wealth manager, I usually begin my day with the financial news shows so I can have an idea of what is going on in the world of finance before I show up for work.

All I can say is… What Drama Queens!  I have never seen a bunch of highly intelligent, highly educated people whining and crying and “oh, the sky is falling” as I have today.  They had one guest host on there who had the unmitigated gall to suggest that our economy is slowly recovering, and that things were getting better – and that is why the stock market is up 60% since March and will continue to rise, with corrections and breaks over time, as is normal – and you would have thought that this person just committed some sort of blasphemy and should be burned at the stake!

YABBUTS.

“Yeah, but… the market dropped so much.” 

“Yeah, but… unemployment is down and how can the economy get better until unemployment is fixed?” 

“Yeah, but… the government stimulus packages are just about over and that put in a false bottom and now we will fall off the edge of the universe as we know it!” 

“Yeah, but the consumer remembers the recession and that will have an effect on what people buy going forward… ie, nothing, ever ever ever again”

“Yeah, but the dollar is weak and getting weaker.  No one really knows what that means… but is sounds scary so we better harp on it for a while… inspite of the fact it could totally reverse the trade gap and end outsourcing of jobs to other countries… we better monger up some fear cuz a weak dollar sounds… um… unpatriotic.   Doesn’t it?”

I have not heard so much Chicken Little since last October and honestly, it turned my stomach.   It reminds me of these fear-mongering authors who write a new financial gloom and doom book every 5 years or so, just to cash in on the conspiracy theorist market who will buy their books.

One would think that such learned gloomy economists would stop and realize that some economic indicators are “leading indicators” and some economic indicators are “lagging indicators.” 

Leading indicators (ie – indicators which PREDICT the direction of the economy) are things like stock markets, interest rates, bank portfolios, and corporate earnings predictions.  So, for example, if the stock market has reversed course and headed sharply up over a period of several months, along with very low interest rates, bank portfolios that are not overextended in loans, and companies currently reporting low earnings but predicting better earnings next quarter – those are forward-looking events and would tend to suggest better days are around the corner.  Oddly enough – that is just about ALL the economic data that is out there right now.

Lagging indicators, on the other hand – such as commodity and home prices, inventories, and unemployment – basically tell us where we HAVE BEEN – not where we are going.  So, if businesses have been laying people off, or home prices have fallen significantly, these indicators are primarily a symptom of economic conditions, not necessarily predictors of where we are going in the future.  Thus, they are known as lagging indicators, as they LAG the real economy.  They may get worse – but they do NOT PREDICT the direction of the economy – the leading indicators do.  Thus the term:  LEADING.

Again, I am amazed at how supposedly learned economists can think that unemployment somehow drives the stock market.  How can a lagging indicator possibly drive a forward-looking indicator?  People invest for the future, not the past.

Which brings us to the crux of the issue:  Lack of faith.  There is so much Chicken Littling and YABBUTTING… by these supposedly learned economists and professors, whom I’m convinced live their lives in tiny little rooms doing nothing but armchair-generaling and writing about other people’s actions, that they are missing the truly wondrous events literally unfolding before our eyes. 

Most economic growth is created when mankind, whereever he or she may be – creates something new out of necessity or invention, or adapts previously unused techniques or technology to increase productivity – or starts a new business or idea because they don’t have a job – and, in doing so, creates new jobs and opportunities for society as a whole.

What new and previously unthought of inventions will be released next year? 

Did you know that there is a company that is releasing a mind-controlled video game – before Christmas of this year?!  Whether or not it makes any money – can you imagine the applications of this type of technology? 

Did you know they are building spaceships to replace the “aging space shuttle fleet?”  I remember when the space shuttle was new!

Did you know that the world’s total knowledge base doubles an estimated every three years?  TOTAL!  Wow.  That boggles the mind.

Did you know that the major drug companies, according to Time Magazine, are spending $600,000 per day to support healthcare reform?  Someone, somewhere must think its pretty good for somebody’s business for it to go thru – and that will likely mean JOBS and economic growth.

Whether it will or not, who knows.  Not you.  Not me.  The free markets will decide.  Either way – humanity – and America – will survive.  Betting against humanity has been a bad bet for thousands of years now, and I’m not ready to start anytime soon.

And these perma-bear economists sit in their office… looking at yesterday’s data… yeah, but… yeah, but…  yeah, but…

Get a real job!  Better yet – start up a business and give someone else one!

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com





Senate Committee to examine 401k target-date funds

21 10 2009

Michelle New Pic

By Michelle Ash, CFP®, CDFA™

 

If you have an employer sponsored retirement plan, such as a 401(k) or a 403(b), you have likely seen “target-date” funds amongst your investment choices. These are funds which state a date, such as 2010 or 2020 as the “target date” for retirement.  The idea behind these funds is that they are appropriately balanced with an equity and fixed income mixture that is appropriate for someone that is that number of years away from retirement.  Over time, the funds automatically become more conservative as the individual draws closer to retirement. The idea is to put the risk tolerance and investment management with these funds on autopilot.

But the Senate Committee on Aging will begin examination this month of the fees, risks, and potential conflicts of interest associated with these funds.

A recent analysis by BrightScope of the investment options in nearly 13,000 plans found that the expenses charged by target-date funds are significantly higher than those charged by other funds on plan’s core investment menus.(1)  Because these funds are now the default investment option of most plans, meaning investors are placed into them automatically if they don’t select other investment choices, this may put some workers at a disadvantage. 

Target-date funds also have no benchmark for comparison. So, who’s to say what the appropriate blend for a target date 2010 fund would be? Consequently, returns from these funds have varied widely over recent years; sometimes causing investors who thought their money was invested relatively safely since they were close to retirement, to experience significant losses.

Our hope is that the Senate Committee’s examination will provide standards for these funds so that, like any other type of fund out there, an investor can ultimately determine for themselves if the fund is truly appropriate for their situation in terms of risk, cost, and personal best interest.

 

(1)  Source: “Companies take reins of workers’ 401k’s”, http://articles.moneycentral.msn.com, 10/21/09

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com





Is it Time to Market Time?

14 10 2009

Mike Carignan Internet

by Mike Carignan, CRPC

I was watching one of the many financial media/disinformation sources this morning and they were talking about the fact that the S&P 500 has had 6 days closing up. This is the most successive up days in the last 2 years. The follow-up question is one that we hear a lot…”Is it time to get back into the market?” Well, let’s think about the last year and where we are.

Last October the market “melted down”.   The media had a field day and was constantly bombarding us with the doom and gloom of the day.  It seemed every day there was some new revelation or calamity befalling the market that was going to cause the end of investing as we know it.  What followed was a mass exodus of money from equity and corporate bond investments into government debt and cash.  Many investors finally “had enough” in late February when the S&P 500 broke through 750 and lost another 70+ points…and they’ve been sitting on the sidelines since.

What have they missed?  Since the March low the S&P 500 has rocketed a whopping 400 points from 676 to 1076 as of 10/12/09. That’s a 59.2% increase.

This is a great illustration of why market timing is so dangerous. It gives us a rational for giving in to our worst fears, selling when everyone else is panicked and then waiting for the other shoe to drop while the market rebounds strongly.

The moral of the story…decide if you want to invest for the long term result or for the thrill of the gamble.

 

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

www.WealthGuards.com





Market Euphoria…

3 08 2009

Mike Carignan InternetBy Mike Carignan, CRPC®

Well it’s the start of a new month and there is a lot of sunshine out there right now.  I mean the college and pro football seasons are about to begin and there seems to be a sense of anticipation and euphoria.  Even if last year their team didn’t do well or had some player scandals, right now everyone’s favorite team is in first place.

If you take a look at the last few weeks in the equity markets you’re going to see much the same attitude.  Much of the fundamental problems that led to the market downturn and the credit crash have not been fixed. Earnings are a little better but not great.  Unemployment is still rising, but slower than before.  Yet there is this feeling of euphoria in the markets that continues to sustain this three week rally we’ve seen.  The S&P 500 alone has increased from 879 to 1,001 (+13.9%) since July 10th!

Is it here to stay or are there some more storm clouds ahead that will dampen the enthusiasm?  Time will tell, but the overall feelings of despair and capitulation seem to be mostly gone and money appears to be following an optimistic view of the future again.  For now, the markets are working for investors again — rebuilding some of the confidence that was lost over the last year.  There is still potential for some summer storms, but it appears the worst of the monsoon may be over and most investors feel that it’s time to start the rebuilding process again. 

 

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Investment advisory services provided by Paragon Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

   www.WealthGuards.com