THIS WEEK IN THE MARKETPLACE
OK. Like most people, you’re probably asking the same question: “I wonder when the market will reach bottom?” Realistically, no one can answer that question with any real certainty.
A number of analysts, many of whom we follow or stay on top of, are all beginning to suggest that “if we’re not at the bottom yet, we’re very close to it.”
I’ll try to give you all a rundown today on their thoughts and projections.
Understand that, while each of these analysts has really good track records in their recommendations, none would agree on the timing or even the same month when they believe that the market will have bottomed. All, though, are suggesting that we may be very close to a market bottom, if we’re not already there. I’ll give you a quick, but individual, synopsis of the suggestions of each of the analysts we normally follow, because they have such good, consistent track records in their overall market prognostications.
It’s time to be aggressive again
The first analyst I want to highlight is now suggesting that, if investors tread carefully, they can start to become aggressive again as they begin to reformulate their stock portfolios. Two key stock plays that he is now starting to recommend are both Dow Jones Industrial Average “blue chip” issues. One issue is the Dow’s oldest member, while the second is one of the Dow’s newer additions.
The next bull market may begin a bit later than you are thinking
Our second analyst is now suggesting that the bear market is now over, and that we are in a transition period from the bear to the bull. He doesn’t believe, though, that the next bull market will begin in earnest until early-2010.
Invest carefully
Analyst number three, ever the carefully thought-out prognosticator, is now indicating his belief that, just in case the market hasn’t really bottomed yet (but he still thinks that it has), investors should hedge their bets by picking out with their broker’s assistance several good quality large-cap blend issues as a prudent first step to getting back into the market.
Bottom fishing.
The president of a well-known, aggressive, short-term trading research firm is now recommending that given that the bottom of the current market has just now been reached now is the time to “begin dipping into equities again, especially those previously good quality issues that have been grossly oversold.”
Going for another train ride
While we’re at it, let’s look at selected foreign stocks, especially those in China. As a senior analyst for a research firm specializing in investments in foreign stocks has recently suggested, “While the earnings of many Chinese public companies may seem grim at the moment, the country’s accelerating railway growth will get you somewhere, thereby making their infrastructure stocks worth another hard look,” as well.”
Getting Ready for the Spring
While a number of analysts are suggesting that we’re still in a bear market, although one that may change into a bull in relatively short order, investors shouldn’t ignore the potential for a significant rally in the early st ages of a cyclical bull market. As a matter of fact, this same analyst also reflects the suggestions of the majority of other analysts (some of which are quoted here) if and when the bull begins to move.
And What about the Stimulus Package
If the stimulus package makes its way through the Congress and then on to President Obama’s desk for signature, then investors need to look at the financial markets response to the stimulus bill, as passed. Wrapping things up are the comments of Art Hogan, chief market strategist at Jefferies & Company, when he said, “As we get more details, we will start to see the enthusiasm we saw at the end of last year for the fiscal stimulus plan.”
He still ended his comments by urging patience, though.
Paul Rendine is Owner of the Rendine Financial Group, LLC in Salisbury, MD, offering securities through First Allied Securities, Inc., member FINRA/SIPC. You can contact him at 410-860-1137 or at his e-mail address at prendine@1stallied.com with any comments or questions.
THIS WEEK IN THE MARKETPLACE
As we move further into the new year, most investors are still continuing to grapple with the fears that were brought on by the dramatic market downturn of 2008. As these emotional times continue, while many financial expert are saying that they know when the market will turn around – no one really knows when the market will turn around, but there is one thing we do know – The market will turn around. It’s just a matter of time.
As a matter of fact, since the market’s huge decrease in 1929, there
have been a number of bear markets, all of which have started new bull markets, as they have moved out of bear territory and back into bull territory. Another interesting fact that also applies and has continually been referred to by technical analysts is that, when the market finally turns from the bear to the bull, from that point on to the market’s next run through the bull to the bear, the market has always responded with higher lows and higher highs.
The point here is if you are a long term investor and your portfolio holds reasonably good quality stocks don’t panic or allow overly emotional market
noise to spook you into selling when you should probably be doing the exact opposite – either holding or buying. The bottom line is this, as one market pundit has suggested in the middle of many bear markets. We have been here before and we have always recovered and eventually enjoyed new periods
of prosperity. The U. S. and world economies are resilient, and that has not changed.
Will the government’s stimulus plan work?
The answer here is: Probably. Historically, for example, in the 1973 to 1974 bear market, the S&P 500 Composite Index declined for 21 months and some wondered if we would ever recover. In the early 1980s, short term interest rates exceeded 20 percent, inflation was in the teens, and the market lost 27 percent. In 1987, the market lost 20 percent in a single day. Earlier
this century as many investors are still smarting from the tech bubble burst and the S&P 500 lost 49 percent, while the Nasdaq Composite Index dropped 78 percent.
To put these historical numbers into context, the Dow Jones Industrial Average in the early 1970s was in the area of 800; in the early 1980s,
it was in the area of 1,100; in the early 2000 century (before the tech bubble burst) the Dow was as high as the 11,000 mark; and, after going to a record high of above 12,000 about a year ago, the Dow seems to have pulled back to its latest resistance level (or technical bottom) of around the 8,000 level.
The point here is, even at psychological or emotional lows, the market has always moved to higher ground. This certainly applies if one uses the Dow Jones Industrial Average, the Nasdaq Composite Index, the S&P 500 (or any other of the major indexes) as your gauge for how the market has moved up
over time. The key is not to be emotionally “Pushed” into selling while comments such as this.
The market slump likes this because it creates opportunities – may seem rather self-serving coming from an analyst, your broker, or some other market index or market guru. The fact still remains that, for anyone to use these numbers in a presentation to you, the client/ investor, they must have already cleared those numbers with their broker/dealer to ensure their accuracy and proper presentation of any marketing brochures during any client investment presentation. At the bottom line, if you are persuaded into selling whatever investment you might have because of what a television talking head said last night, you might be making that decision to sell for all of the wrong reasons.
Think first, call your broker, do your own homework, and then make an informed decision.
Paul Rendine is owner of the Rendine Financial Group, LLC in Salisbury, Md., offering securities through First Allied Securities Inc., member FINRA/SIPC. You can contact him at 410-860-1137 or at his e-mail address at
prendine@1stallied.com with any comments or questions.