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Good Morning! Some food for thought.
- Historically, the stock market is a discounting mechanism. Therefore, it bottoms approximately six to nine months ahead of economic turns for better and for worse.
- During the 1970’s Unemployment peaked above 9%; Inflation was above 10%; the Fed Funds Rate was 20%. We recovered from that.
- If President Obama has bitten off more than he could chew, perhaps some moderate Democrats will begin to buck his policies.
- There are no pessimists at the top and no optimists at the bottom.
- You have $120,000 in cash between your IRA and your Brokerage Account.
- Gold is a hedge and not an asset class.
- The labor market is a lagging indicator. Employers do not wish to lay off so that they put it off until they have to. Historically, this is late in the recession.
- Come Autumn, year-over-year earnings should begin to grow again. See point 1.
- The S&P 500 is down more than 56% from the top. At what point has the economic recession been priced in?
- If the United States cedes some of its economic might, this doesn’t necessarily mean that the U.S. stock market, with a large percentage of its sales abroad, will continue to falter.
- If you believe that we are dealing with an economy whose only precedent is the Great Depression, then you must decide how much of your money, in addition to the above, you wish to put into your “ark.” The probability of this is difficult to determine so, for most investors, is a personal decision.
- Investors will most likely exit this bear market severely underweighted in stocks.
- Is it really “different” this time? If so, was it different during the “dot-com” era? Was it different during the “housing boom?” No, trees do not grow to the sky nor do carrots grow to China!
Dennis Fagan
Chris Fagan