By David Guttery
Please take a minute to visit finance.yahoo.com and review the five year chart of the S&P 500 Index. What you’ll see is a series of higher highs, and higher lows, in a line having a slope of about 40 degrees. Any technical analyst will tell you this is a bullish sign. We had a short-lived correction of about 10% in the third quarter of 2014, and I believe what we’re seeing today will show a similar pattern.
China took steps to devalue its currency because doing such gave it a competitive advantage in global markets. It rattled global investors because it was unexpected, but then again, this isn’t the first time we’ve seen this from such a non-transparent, communist government. This isn’t anything new, in other words.
Economic metrics such as leading indicators, regional Fed surveys, consumer confidence reports, personal income, personal spending, employment, non-defense capital good spending, housing, the manufacturing PMI and services PMI – all point to a US economy in expansion territory – and, in some cases, are posting readings we haven’t seen in more than 15 years. The economy isn’t broken.
Market fundamentals, relative to previous major high points of inflection, are not overly valued. There are many well known, sector leading companies, posting record high profits, while swimming in cash, and that happen to be trading at substantial discounts to values of a month ago. These are buying opportunities.
Remember that times like these magnify the reasons for objective driven investing. Long-term objectives should be met with allocations suitable for the long term, and this will include a preponderance of equities and thus greater risk. Shorter term objectives should likewise be more conservative, and stable. This is not the time for second guessing the fundamentals of long term investing, but rather an opportunity to dollar cost average into weakness, dilute cost basis, and strengthen long term positions.
There is so much more to consider than upon which I can elaborate in this article. I disseminate updates through email and social media on a regular basis, so please find our page on Facebook, LinkedIn, and Twitter for more frequent and detailed updates.
David R. Guttery, RFC, RFS, CAM, is an Investment Advisory Representative of Ameritas Investment Corp, and President of Keystone Financial Group, in Trussville, Alabama. David independently offers securities and investment advisory services through Ameritas Investment Corp. (AIC) member FINRA/SIPC. David has been in practice for 24 years, with a distinctive focus on the management of retirement assets for the production of durable income.