Does the Dow dropping 2% and the S&P dropping 2.5% mean that we will have a terrible year? It could definitely mean that the market will not do as well as its fantastic last year. I believe that this market is just showing people being cautious in a new year with Fed tapering and skeptical of the market return from last year. The market's return last year was Dow gained 26.5% and the S&P returned 29.5%. Way above historical averages so it makes many investors hesitant about the next year and many think a bubble has formed. The market has several factors pushing it down, people taking profits, a new Fed Chairman, and a possible idea for a bubble. This year though is not 2008 or 1929.
So many companies had such a great fourth quarter/Christmas season. They beat expectations in earnings and returned high profits. A few big names with high bars on earnings fell flat but this was not due to poor economic conditions. It was mostly changing tastes, weather related, or poor execution. Companies sometimes do not do well in a quarter it does not mean that a bubble has formed in stock assets and everybody needs to convert to cash.
You can try and beat the market but I know I cannot beat the market so I remain in my positions and trust that the economy is strong. The economy collapses in a manner that all companies go under it won't really matter that much that you have cash because it would be worthless. Take head and do not get too caught up in the wildness and scare tactics of the market. Remain strong and stick to your investment plan that you know works.
The market I think will still be up this year or just slightly down. Companies are doing great and the economy is doing better. Although with stocks being down this week it would be a good time to get in to investments that might have been expensive last year or rearrange your portfolio to a new balance. Continue making wise investments, studying and choosing.
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