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Good Morning!
Stocks remain under pressure this morning after dropping nearly 400 points over the last hour of trading on Friday. As we have noted many times (too many than we would have liked), do not try to catch the bottom allocate assets to help meet your longer-term (three plus years) objectives and remain in cash for all needs shorter than this time frame.
We liken this crisis as an economic version of World War II. Budget deficits ran up to 30% of GDP during World War II and even if the U.S. runs a $1 trillion deficit, that still amounts to less than 7.5% of GDP. That said, once we get past this mess, the government must use fiscal restraint.
Bottom line for investors, buy on weakness in the market, not the kind of which may be a day or two, but when fear is elevated, even from these levels. High yielding stocks with solid balance sheets and payout ratios (dividends as a percentage of earnings) below 60%. Look also for opportunities in the corporate fixed income markets and preferred stock.
Dennis Fagan
Chris Fagan