January saw Congress vote to kick the debt ceiling can down the road for a few more months. This means that there is now a temporary suspension of the debt ceiling until May 19th. The bill, known as the ‘No Budget No Pay Act of 2013’ directs both parts of Congress to adopt a budget resolution for fiscal year 2014 by April 15, 2013. If either part of Congress fails to pass a budget, members of such part would have their paychecks put into an escrow account starting on April 16th until that part adopts a budget. You think that will get them moving?!
From a markets perspective, the US Stock Market hit multi-year highs in January, as measured by the S&P 500 Index. While we like to see the markets rising, it’s important to take a step back and look at history to see what we may expect in the near future. While the market continues to rise, the tenuous economic environment and desperate global central bank measures we are currently seeing definitely lends itself to being cautious. Below is a chart that was included in J.P. Morgan’s 2013 1st Quarter ‘Guide to the Markets’ report. Pay close attention to the percentage rises and drops in the market; the market has only reached these current levels twice in the last 15 years. In both cases, there was a little more upside, but plenty of room to the downside. In both of the other market peaks (2000 and 2007), the underlying economy was healthier than our current economy. Accordingly, we believe this is a point in the markets where prudence should be sought more than performance. We continue to participate in the markets, but be assured we stand ready to take risk off the table if our sell side metrics are met.
Do you have an investment strategy that seeks to protect your portfolio against volatile economic conditions? Call me to schedule a free review of your current investment portfolio – 913.402.6099.
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.