In
many ways it sums up the historical
performance of the markets. At this
writing, the Dow has reached an all-time
high, having closed on October 4th at
11,866.69 or 10.72% year-to-date (source:
The Wall Street Journal); this despite
the continuing threat of terrorism,
peak oil and nuclear rumblings from
North Korea and Iran.
The
housing market has slowed rather dramatically
and those industries which serve it
such as lumber, residential construction
and that segment of the labor force
are, in turn, adversely affected. The
unemployment rate as reported in The
Wall Street Journal, dipped in September
to 4.6% from 4.7% in August. The Fed
appears to be content with holding interest
rates at their current level and there's
even speculation that they could cut
rates at the next FOMC meeting. The
Administration, in anticipation of November's
mid-term elections, touts a strong economy
and I do believe that expansion will
continue, albeit at a slower rate.
So
what's an investor to do? Are we surfing
the crest of a new bull market wave
or are we headed for a wipe out (figuratively,
of course)? Recalling the Bette Davis
interview, she spoke of her success
being in great part due to her discipline.
The same should be true of investors.
As long as your goals remain the same
and you have a strategy that is designed
to attain them, bumpy or smooth market
ahead, you should be on the right track
to success.
A
client asked me the other day what I
would think of his moving to the sidelines
if the Dow (remember folks, only 30
stocks) were to slip below 11,000. That
would be a drop of approximately 7.25%.
My advice initially is not to do so.
Look
at the chart .The likelihood of being
out of the market on the 40 "best"
days or 40 "worst" days is
statistically nearly impossible, but
if you were to miss the best, your return
on investment would be dismally below
the market as measured by the S&P
500. Conversely, were you to miss all
of the worst days you'd beat it handsomely,
and nicely, if you missed both best
and worst. Rather, review your asset
allocation and perhaps pare down your
riskier equities and add fixed income
to the mix. In any case, talk to your
professional; he or she should be your
"seatbelt."
