How would you describe the quality of your life, financially and personally, right this minute? Turn off the television for a few minutes; breathe, reflect and digest current facts as you perceive them. Ask yourself what you think the future holds.
Perceptions are based on incoming information. Often, we overlook the need for independent and critical thought. Invest in your future and take the time to process incoming information and how it influences your reality. Don’t get bluffed!
For instance, is this a bull market emerging from the ashes? Does the economic data justify rising market values? During the third quarter, market averages ticked up, charming investors and analysts wanting to see a new bull market, but it should be pointed out that large percentage increases may look less impressive, considering that they’re calculated against low points. Nevertheless, the Dow Jones Industrial Average (an unmanaged index of 30 widely held stocks) did register its best quarter since 1998 and its best third quarter in 70 years.
Optimism and “less-bad” economic reports fueled a market surge. For the record, the Dow finished the quarter at 9,712.28, a gain of 1,265.28 points, or 15 percent, since the close on June 30. During the same period, the NASDAQ Composite (an unmanaged index of all common stocks listed on the NASDAQ National Stock Market) rose to 2,122.42, for a gain of 15.7 percent, and the S&P 500 (an unmanaged index of 500 widely held stocks) finished September at 1,057.08, up 15 percent over its close of 919.32, on June 30.
Meanwhile, overseas, Asian markets had a subdued quarter, while European markets were generally upbeat. London’s FTSE 100 blue-chip index (an unmanaged index of the 100 most highly capitalized UK companies) rose 21 percent, its best quarter since it was launched in 1984. This far surpassed analyst’s forecasts.
No doubt the third quarter was notable. Most of us have survived the year, shell-shocked and altered, but alive. In mid-September, we acknowledged the first anniversary of Lehman Brothers’ demise and Federal Reserve Chairman Ben Bernanke said the recession, which began in December 2007, is probably at an end.
Retail and housing industry figures may not support Ben’s statement. These reports weren’t encouraging, but neither were they disastrous. One jobless rate report was 9.7 percent, while other reports have this number much higher. Analysts seem to agree that a perceived economic recovery won’t solve unemployment issues. Could this be a jobless recovery? Unemployment is historically a lagging economic indicator, but the bottom line for individuals and confidence levels is contingent upon jobs.
In addition to jobs, gold, seen by some as an inflation hedge, is another hot topic. Gold, other precious metals and raw materials continued to rise during the third quarter. December Gold futures rose above $1,000 an ounce. Oil prices fluctuated within a relatively narrow range in conjunction with economic data. Gross domestic product (GDP) fell at a 0.7 percent annual pace during the April-June quarter (less than the forecast 1 percent) and the price for November delivery of light, sweet crude oil moved up to just above $70 a barrel, caused by brightening prospects for higher U.S. sales. At the pump, gas prices fell as the quarter ended, after rising slightly during the summer months – and they were generally far below prices in September last year.
We continue to put money away for the proverbial rainy day, but at a slower rate than earlier in the year. The savings rate dropped from 6 percent in May to 4.2 percent in July, the latest figure available from researchers at the St. Louis Fed. High savings rates are praised, yet those dollars could be spent on goods and services that would drive job and economic growth; just one of many reasons why it’s so difficult to find a quick fix for the economy.
Investors who see the U.S. and global economy in a general recovery mode are returning to the market. Some of us even have gains. Values did increase since the early part of the year. This is a good time to review portfolio holdings to look for year-end tax planning opportunities and to make sure that your investment mix is in harmony with the changing markets going forward.
Even when analysts disagree over their forecasts, markets continue to offer favorable prospects. Ask questions about the market as it is today and find the right investment opportunities for you. If you don’t understand something, speak up and ask for simple explanations; knowledge is power, and it’s your money!
As a reminder, investing involves risk, and you may incur a profit or a loss. Past performance is not an indication of future results. Investors can’t invest directly in an index. Investing in commodities and precious metals is generally considered speculative, because of the significant potential for investment loss. They’re volatile investments and there may be sharp price fluctuations, even during periods when prices overall are rising. When appropriate, these should only form a small part of a diversified portfolio. This appears to be common sense, but often is overlooked. That’s my disclaimer for the day! As always, feel free to contact us with any questions you may have.
Darcie Guerin, financial advisor and branch manager, Raymond James & Associates, Inc. 606 Bald Eagle Drive, Suite 401, Marco Island, FL 34145, provides this article. Gulfshore Life magazine named Guerin as one of the Best Personal Wealth Managers in the Southwest Florida area for 2009. If you have questions, e-mail her at Darcie.Guerin@RaymondJames.com or call 389-1041, toll free (866) 343-0882 or visit RaymondJames.com/Darcie. Past performance may not be indicative of future results.