Can the markets rebound?
It's time to leave 2008 behind. We know how bad 2008 was. We've all seen the headlines. Now...it's yesterday's news. Let's turn our focus on 2009. There is reason to be optimistic. We have a new administration (whether you agree or disagree with Obama politics) and a huge new stimulus/infrastructure plan that may bode well for the economy. We have the Federal Reserve and the Treasury working to thaw the credit markets. We have economists sensing the beginnings of a recovery later this year.
Here are some thoughts as we enter 2009:
Eyes on the first few days. Traditionally, stock market analysts have looked closely at the first few trading days of a new year for a clue as to how the markets will do the rest of the year. When a new President takes office after a bearish year, the interest in these first few days is heightened. If the market performs well or poorly, the thinking goes, it "sets the tone" for the first quarter and the year.
Stock Trader's Almanac confirms that a positive January has led to a positive year for stocks more than 90% of the time. Historically, Januarys have been bullish on Wall Street. But as the Almanac notes, every January in which stocks have lost ground has "preceded a new or extended bear market, or flat market." So keep watching.
No Great Depression Here!
We're not living in 1931. You've probably read articles that compare and contrast the current economy to the 1930s. Well, we haven't gone that far back. Sure, we're seeing a lot of short sales and foreclosures. But we're not seeing every other bank shuttered, soup lines on the corner, or one out of every four Americans looking for work. The economy is down, but not out.
What we've done, in a sense, is to go back a few years. Mortgage rates, oil futures, retail gas prices, home prices, inflation - they are all in the ballpark of what we saw in 2003 or 2004 (and mortgage rates are lower than that). Keep in mind that in the last 2-3 years, you had the real estate market at its peak, the stock market setting records, and a commodities market that was on fire. Inevitably, all that cooled off. Severely, yes - but inevitably. Recessions are part of the natural economic cycle.
How Will We Spot a Bull Market?
When do things turn bullish? Well, a few things have to occur to pave the Street for another extended bull run. One, the federal government stimulus and rescue plans have to take effect. Two, banks have to start lending more readily. Three, the real estate market has to show new signs of life. Improvements in corporate earnings, joblessness and consumer spending will also help.
We might be poised for great things. In recent times, powerful bull markets have emerged from low points in stocks and consumer confidence. You can point to 2003, after Black Monday in 1987, and 1982. Moreover, some of the best long-term investing opportunities have emerged from extended bear markets or tepid markets.
Consider this: The Leuthold Group, an institutional research firm based in Minneapolis, just concluded that the annual returns of the S&P 500 from 1998 to 2008 averaged -0.93% per year, not including dividends. (This study wrapped up at the end of November 2008.) As the research notes, "when 10-year annual returns [of the stock market] fall to 1% or less, the next 10 years produce an average cumulative return of 183%". So there's some hope for you.
What should you do in 2009?
The start of the year is a good time to review and revisit your financial plan and your long-range investment strategy. Have you hired a fiancial planner yet? If not read Chapter three of The Faith-Based Millionaire (I haven't taken down the FREE download at www.jayperoni.com yet, but plan to soon). Chapter Three ( A Fool Forever?) will give you some tips on how to choose a planner.
It's time to leave 2008 behind. We know how bad 2008 was. We've all seen the headlines. Now...it's yesterday's news. Let's turn our focus on 2009. There is reason to be optimistic. We have a new administration (whether you agree or disagree with Obama politics) and a huge new stimulus/infrastructure plan that may bode well for the economy. We have the Federal Reserve and the Treasury working to thaw the credit markets. We have economists sensing the beginnings of a recovery later this year.
Here are some thoughts as we enter 2009:
Eyes on the first few days. Traditionally, stock market analysts have looked closely at the first few trading days of a new year for a clue as to how the markets will do the rest of the year. When a new President takes office after a bearish year, the interest in these first few days is heightened. If the market performs well or poorly, the thinking goes, it "sets the tone" for the first quarter and the year.
Stock Trader's Almanac confirms that a positive January has led to a positive year for stocks more than 90% of the time. Historically, Januarys have been bullish on Wall Street. But as the Almanac notes, every January in which stocks have lost ground has "preceded a new or extended bear market, or flat market." So keep watching.
No Great Depression Here!
We're not living in 1931. You've probably read articles that compare and contrast the current economy to the 1930s. Well, we haven't gone that far back. Sure, we're seeing a lot of short sales and foreclosures. But we're not seeing every other bank shuttered, soup lines on the corner, or one out of every four Americans looking for work. The economy is down, but not out.
What we've done, in a sense, is to go back a few years. Mortgage rates, oil futures, retail gas prices, home prices, inflation - they are all in the ballpark of what we saw in 2003 or 2004 (and mortgage rates are lower than that). Keep in mind that in the last 2-3 years, you had the real estate market at its peak, the stock market setting records, and a commodities market that was on fire. Inevitably, all that cooled off. Severely, yes - but inevitably. Recessions are part of the natural economic cycle.
How Will We Spot a Bull Market?
When do things turn bullish? Well, a few things have to occur to pave the Street for another extended bull run. One, the federal government stimulus and rescue plans have to take effect. Two, banks have to start lending more readily. Three, the real estate market has to show new signs of life. Improvements in corporate earnings, joblessness and consumer spending will also help.
We might be poised for great things. In recent times, powerful bull markets have emerged from low points in stocks and consumer confidence. You can point to 2003, after Black Monday in 1987, and 1982. Moreover, some of the best long-term investing opportunities have emerged from extended bear markets or tepid markets.
Consider this: The Leuthold Group, an institutional research firm based in Minneapolis, just concluded that the annual returns of the S&P 500 from 1998 to 2008 averaged -0.93% per year, not including dividends. (This study wrapped up at the end of November 2008.) As the research notes, "when 10-year annual returns [of the stock market] fall to 1% or less, the next 10 years produce an average cumulative return of 183%". So there's some hope for you.
What should you do in 2009?
The start of the year is a good time to review and revisit your financial plan and your long-range investment strategy. Have you hired a fiancial planner yet? If not read Chapter three of The Faith-Based Millionaire (I haven't taken down the FREE download at www.jayperoni.com yet, but plan to soon). Chapter Three ( A Fool Forever?) will give you some tips on how to choose a planner.
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