• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
 
mhtmlmain:1/12/09 12:58 PMmhtmlmain:Page 1 of 10
 
Homepage
 
Blog Home
 
Contact Us888.970.8987Five Key Points for Investing in the Coming Year:
 
Stock markets, on average, rallied over 34% one year after a recessionends, and economic expansions last, on average, 68 months for a cumulative gain of 176%
 :1st Key Point
 
Much of the investment return occurs within the first three to sixmonths of the rally.
 :2nd Key Point
 
Stock markets recover well before economic news turns positive.
3rd Key Point:
 
Do not try and 'time the market'.
:4th Key Point
 
Have a well-laid investment plan.
 
Your investment plan should basedupon factual, sound investment processes and one that is not based upon emotion.
:5th Key Point
 
(See supporting charts and graphs below).
Managing Your Investments in these Economic Times; Five Key Points, aDetailed Look
 
The beginning of each New Year brings much fanfare to the art of making predictionsand creating resolutions. Last year I predicted I would lose 41 pounds. I did. My junkmail has been reduced dramatically with the help from the folks at(They estimate we each receive 41 pounds of junk mail each year.)www.41pounds.org
 
I will resist the temptation to offer any kind of 2009 market prediction except for thefollowing;
This current recession will end and therewill be economic expansion that follows.
 
How can I go out on such a limb with such a bold prediction?Note the chart below which reflects the past nine recessions starting in 1946. In eachof the nine recessions economic exansion followed once the recession ended. On
Blog Articles:
 
1970s Bear Market2008Elections2009Predictions401(k)AMTBailoutBalanceSheetsBankingBear MarketsBreaking theBuckCashConsumer confidenceCreditCredit CrisisDALBARdemanddestructionDollar DomesticexportsEconomyEmergingMarketsEmotionsEstate taxExportsFalling dollar FDICForwardthinkingGDPGenworthFinancialGoldmanSachsGoogleHedge FundsIncome taxInflationInvestmentBasicsInvestmentProcess
 
 
mhtmlmain:1/12/09 12:58 PMmhtmlmain:Page 2 of 10
 average, the past nine recessions have lasted 14 months with an average marketdecline of 32.6%. The recession of 2008-2009 will last longer, and has already gonedeeper.Over long periods of time, world economies will grow and then they will decline. It isvery much a part of the business cycle. The good news is that in recent decade'seconomic declines have been shorter and the economic expansions have lastedlonger.The main 'take away' from the graph below is that economic expansion and marketrecoveries occurred AFTER every recession. The average of those nine economicexpansions endured 68 months generating an astounding cumulative market gains of 176% return. This is how I arrived at my bold prediction.I am reminded of the minimal use in making short-term market predictions. In the four issues of Barron's in January 1994, not one of the economists interviewed for the'Barron's 1994 Roundtable' called for an increase in interest rates that year. TheFederal Reserve increased interest rates seven times over a six month period in 1994.I would rather focus on what I know will happen. This recession will end, and economicexpansion will follow. I am most certain that in each of the past nine recessions, fear and despair ruled the day; investors could not fathom any possibility for futureeconomic recovery. Sound familiar? Do you feel that way now?In these economic times, investors are challenged to believe that they are still on theright track for investing. Quite simply, this global economic crisis has had the ability toshake one's confidence in their investment strategy.Given the magnitude of global news headlines and market behavior, it is easy to
Investor Fear JeremyGranthamJohn BogleJP MorganLIBORLiz AnnSondersMark MobiusMarketRecoveryMarket TimingMarket ViewsMissing theMarketMoney MarketFundsMortgagesMutual FundLiquidationsOilPastPerformancePortfolioStrategistRecessionRequiredMinimumDistributionRMDRobert DollShadowBankingSystemSimplified401kSocialSecuritySPX 500IndexTax CutsTax proposalsTaxesTED SpreadTesting theBottomTom BrownUBSUncategorizedUnemploymentUSGovernmentBondsUS TreasuryBondsVIXVolatilityWarren BuffetWeak HandsStrong Hands
 
mhtmlmain:1/12/09 12:58 PMmhtmlmain:Page 3 of 10
eeve one s no on e rg nvesmen pa. urng exreme mare ecnes sucas the one we are in, you might think that selling all your investment and going to cashis the right thing to do. An investor may have a unique need that dictates a certaincourse of action away from the following recommendations, but generally speaking,selling assets in a declining market is the wrong action to take.
1st Key Point:
Stock markets, on average, rallied over 34% one year after a recession ends, andeconomic expansions last, on average, 68 months for a cumulative gain of 176%
2nd Key Point:
Much of the investment return occurs within the first three to six months of the rally.This generally happens while economic news is still negative. Note the chart above,15% return in first 3 months of recovery after a recession and 23% return within sixmonths, on average. If an investor is in cash, they lose out on much of the recoverythe markets have to offer.
3rd Key Point:
Stock markets recover well before economic news turns positive.Financial markets are always looking into the future to determine their direction. In thechart below, we can see the S&P 500 index from 1974 through 1975. The threerectangle boxes reflect negative economic growth from Oct 1974 to July 1975 asmeasured by US. Gross Domestic Product, GDP. Note how the market rose duringthat same time frame, well over 40% in just nine months and over 30% in twelve
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...