What Lies Ahead for the Market?

480px-Question-markThe simple answer to this question is, no one knows.  And trying to make good long-term investment decisions based upon what you may think is going to happen is foolhardy, as the cost of being wrong is usually greater than the benefit of being right. The goal of a long-term investment strategy is to position your portfolio so that you can enjoy some benefits if the markets move in your favor and so that you don’t get hurt too badly if markets move against you.

At the present time it is particularly hard to get a feel for what is on the horizon.  There are signs that the U.S. economy is doing well and that should be good for the U.S. stock market. On the other hand, if interest rates increase to a point where investors can actually earn some return investing in fixed income, we believe there is a lot of money invested in stocks right now to get some return that really belongs invested in fixed income and will return there when rates increase. Decreased demand for stocks should push their price down. The strong U.S. dollar versus foreign currencies – and particularly the euro – should be negative for U.S. stocks as it makes domestically produced goods more expensive abroad and makes foreign-produced goods cheaper in the U.S.

It seems as if the international markets, which have been lagging the U.S. for the past few years, should be in a position to break out with the governmental stimulus that is being provided to those economies.  But the scepter of problems with Greece, the possible “Grexit” (Greece exiting the euro currency) and concern about contagion to other challenged European economies casts a pall on what might otherwise be a pretty optimistic outlook for foreign stocks.

Is the period of historically low-interest rates on fixed income investments nearing an end?  Many say so and wait with bated breath for the first decision by the Federal Reserve to increase rates.  However, within the past few weeks we’ve seen rates on the 10 year U.S. Treasury bond rise to almost 2.5% – leading many to think the inevitable increase was here – only to see rates fall back to 2.2%.  Despite all of the thought that rates in the U.S. will rise and the rise is imminent, we are concerned that the rates on U.S. sovereign debt are actually higher than the rates offered on any other developed country sovereign debt.  This could lead to a world-wide demand for U.S. government debt which would counteract any efforts by the Fed to increase rates, causing them to remain low for some time yet.

The goal of prudent long-term management is not to correctly guess which scenario will play out, but rather to position your portfolio so you can benefit if markets go up without getting hurt too badly if they do not.  That is what we continue to strive for in our work for you.

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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