September was a good month for investors. As a matter of fact, after back-to-back 15% gains that made for the best two quarters since the first half of 1975, the S&P 500 Index still needs to advance another 39% for the index to break even for the decade.
That being said, yesterday the stock market incurred its sixth drop in seven days as it has taken a break from its bull run.
“Fear is still very, very fresh in people’s minds and the magnitude of the potential disaster that we had last September through March, I think still has investors pretty skittish,” said Darell Krasnoff, managing director of Bel Air Investment Advisors in Los Angeles. ”So our sense is that some bad news can shift sentiment pretty quickly.”
The following are some of the reasons behind the market’s recent retreat:
- The Institute for Supply Management said its index of manufacturing activity slipped in September.
- The Labor Department said new claims for jobless benefits last week were higher than expected. Job cuts in September were more than expected and the U.S. “official” unemployment rate has risen to 9.80%. However, the “broader” unemployment rate (technically called the U-6 rate) is currently at 17%. The broader figure is often considered a much better representation of the employment picture in the U.S.
Let me give you a little background regarding the difference between the official unemployment versus what is considered the broader unemployment rate. The 9.8% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things.
The broader employment figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.
- Major automakers on Thursday posted big drops in September sales following the government’s incentive program in July and August. A GM executive told reporters in a conference call that it was a more difficult month than they anticipated.
- The Commerce Department said consumer spending surged by the largest amount in nearly eight years in August, even as personal income growth lags. Consumer spending rose 1.3 percent and incomes edged up 0.2 percent.
About a third of that spending increase was from auto sales. However, now that the cash for clunkers program has ended, we may see consumer spending fall flat or trend down in the short-term. Along this line, economists worry whether that rebound can be sustained with U.S. households facing rising unemployment and tight credit conditions.
The U.S. and world stock markets have been on huge bull runs over the last six months, so let’s not be shocked to see them take a break and let off some steam. You need to be prepared to see the stock market correct in the short-term (i.e. several months) before making a more long-term bullish / upward trend. Many of you have portfolios with a mix of stocks and bonds, which does not completely insulate you from declines. However, any declines should be less than the market. If you are concerned regarding potentially seeing your portfolio(s) decline in the short-term, please contact me to discuss it. Otherwise, just remember that this is the natural part of an eventual long-term economic recovery and bull market.
Some of our funds were recognized for their long-term, superior performance
The following are links to articles on certain mutual funds that some of you own. Feel free to clink on the links for more information on the funds and their managers.
Fairholme (FAIRX)
http://www.investmentnews.com/article/20090920/REG/309209993
Ivy Asset Strategy (WASYX)
http://www.investmentnews.com/article/20090920/REG/309209994
Pimco Total Return (PTTRX)
http://www.investmentnews.com/article/20090920/REG/309209997
Complications associated with alternative energy – wind and sun
I am an advocate for alternate / renewable energy. However, the various options such as wind, solar, geothermal, etc. each have challenges that need to be overcome before they become truly economically feasible, and reliable. This is why I have been lukewarm about investing in alternative energy. The attached Wall Street Journal article outlines some of these challenges that need to be overcome, let alone bringing their costs down so they are more competitive with current energy sources. For the foreseeable future oil, coal, natural gas and nuclear will need to be the backbone of our energy needs until advances are made in alternative energy. This sector can be quite profitable, but it may be just a little early to be chasing these profits.
Upcoming Events
Our Strategic Life Planning Director, Debra Kunz, MBA, CSLP, continues to speak and teach in the community.
October 14th – “7 Do’s & Don’ts to Cope with a Layoff”
Free education program.
Your next career move, money, retirement and family depend upon how you manage this life transition. Debra Kunz is facilitating this program at the request of the Village Presbyterian Church Career Transition Center. Contact Debra for information about presenting this program, and others, for your organization, 913-897-2074 or dkunz@iia-kc.com.
For a list of all upcoming events visit www.iia-kc.com/events.
Quotes
| “I never doubted my ability, but when you hear all your life you’re inferior, it makes you wonder if the other guys have something you’ve never seen before. If they do, I’m still looking for it.” Hank Aaron, baseball legend“The greatest obstacle to discovery is not ignorance–it is the illusion of knowledge.” Daniel J. Boorstin, historian, professor, attorney, and writer
“Win without boasting. Lose without excuse.” Albert Payson Terhune, author and journalist |
Tony Moeller, President
Integrity Investment Advisors, LLC
12721 Metcalf Ave., #202
Overland Park, KS 66213
tmoeller@iia-kc.com
913-897-2074
The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.
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