Yesterday

Yesterday all my troubles seemed so far away. This is not about that Beatles song although yesterday it seemed my troubles were more omnipresent than they are today. What exactly was yesterday’s bond and stock market debacle?
Poor participation in the US treasury auction backed up rates for bonds thus decreasing their values. The ten year US treasury is currently trading with a yield of 3.86% - almost .25% higher than 10 days ago.
Stocks took their first drubbing in a week — many of our favorite companies lost more than 1% on the day - Nike, Diageo and Bristol Myers all fell more than 1%.
Was this a one day event or the first in a series of acts as the market sells off? We believe that investors are spending MUCH  too much time analyzing where the market is headed tomorrow and less on longer term investing.  It is never fun to buy the market at a short term top BUT its even less fun to sit idly by watching as the market advances. Where are all the doomsday prophets from March 2009?
Here’s our prognosis- interest rates will head higher - not dramatically but eventually and subtly. Incorporate some high yield and shorter term maturities into bond portfolios.
Stocks are going to have a solid year (much of the growth may be in prices already) with roughly 1/3rd to 1/4 total return being comprised by dividend.
Yesterday was a minor blip on the investing radar screen BUT as always stay diversified both within sectors and asset classes.

So instead of “Yesterday” being your Beatles theme maybe “Long and Winding Road” might better suit the typical investor’s needs.

This entry was posted on Thursday, March 25th, 2010 at 8:55 am and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.