|Total Returns %||1 Week||YTD|
|Dow Jones Industrial Average||+0.84%||+0.84%|
|S&P 500 Index||+1.10%||+1.10%|
|U.S. Aggregate Bond Index||-0.23%||-0.23%|
|MSCI All Country World||-0.36%||-0.36%|
Source: Morningstar, Inc. Data through 1-7-11
I hope everyone had a safe and happy New Year. As you will notice going forward, I have slightly changed the layout and information provided in my weekly market commentary so as to provide the most relevant information to my clients and friends.
After taking a break from writing for a few weeks during the holidays, 2011 is already offering up plenty to talk about. The U.S. stock markets and global economics look much like they did at the beginning of 2010. The stock market is riding high in the midst the ongoing debt crisis in Europe, and now the health of U.S. States, as well as the Federal Government, is getting dicey. As I write this update, the New York Stock Exchange (NYSE) Bullish Percentage sits at 80%; this indicator shows the percent of stocks trading on “buy” signals. The last two times this indicator was in the 80% territory, we saw declines of 7% (early 2010) and 16% (spring 2010).
Needless-to-say, I would not be surprised to see the market pull back 5-15%, creating some possible buying opportunities. At this point in the market, in the short-term, there is more downside risk than upside potential. This is a perfect time to take some gains off the table and look for buying opportunities on any dips or drops. In the short-term, I will be revamping my clients’ portfolios to reflect the realities (risks and opportunities) of global markets.
On Thursday, Treasury Secretary Timothy Geithner warned law makers that they must raise the debt ceiling for the U.S. to avoid a government default on its debt. According to the Washington Post, Mr. Geithner sent a letter to every member of congress stating:
“…the national debt stands at $13.95 trillion – $335 billion short of the limit on borrowing that Congress set last year. Unless Congress acts to raise the limit, the United States will default on its debt, an unprecedented event that could destroy millions of American jobs, cause interest rates to spike, damage the dollar, and halt payments to millions of Social Security recipients, veterans and active U.S. troops.”
In the end, the decision to raise the debt ceiling is lose-lose. If it is not raised, the affects will be catastrophic immediately. If the ceiling is raised, the affects will be catastrophic a little later down the road. Either way, deep cuts in spending will have to happen. And all of this doesn’t even mention the dire circumstances that the U.S. State budgets are facing. The discussion of raising the debt ceiling does not even take into account that the government is likely to have to come to the aid of a state or two (or three).
Would you like an analysis of your current investment portfolio? Call me to schedule your free consultation- 913.693.7918.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.