Things are Looking Brighter

Those who thought Tuesday’s rally was the beginning of a bull market, perhaps yesterday’s down day and today’s ho hum performance are disappointing. However, there is quite a bit of encouraging news:

• Governments in US, Europe and the UK have aggressively responded to the credit crisis. Monday's generous rate on commercial paper on Monday and yesterday’s Fed rate cut was further proof of our government’s willingness to do whatever it takes to get these markets moving again.
• Some governments are providing fiscal stimulus to bolster economic activity. Australia recently unveiled a $A10.4 billion package. In the US there is talk of a post-election stimulus plan.
• Oil prices, which until recently were seen as a major threat to global growth, have retraced significantly. From late July until early October, crude oil futures fell by 45 percent from a record $147.27.
• According to Dimensional research, the average duration of bear markets in the US from the end of 1965 until the middle of this year was about 14 months. This one has lasted about one year and the longer it goes on, the closer we are likely to be to the next bull market.
• Unless you have sold your holdings, your losses so far are only on paper. Market recoveries after prolonged downturns tend to come in quick sudden bursts. All you need to do to capture those recoveries is to stay in the market.
• Volatility is declining and the panic selling has diminished. As markets work toward more “normal” trading conditions, the world will move on and the appetite for equities will return.
  
  If you’re concerned about how you’re invested or wondering how your portfolio allocation can be improved, give me a call for a no obligation review and discussion. You have nothing to lose and years of future prosperity to gain.