On Friday morning May 3rd 2013 a strong U.S. jobs report pushed stock markets to record high levels. So is it time to worry about a crash or correction? Not if you are properly allocated. We suggest that the short term swings in the markets do not matter for the investor whose portfolio is properly diversified. We recommend most people keep cash, and short term fixed holdings, on hand for any anticipated expenses over the next 12 – 18 months. We also recommend that people have an emergency reserve of 4 – 6 months living expenses in cash and liquidate holdings. If someone has done this then swings in the market can be much more manageable and help ensure short-term volatility does not affect your income or lifestyle.
Nobody can say what the markets will do short term. We feel that the markets will continue to move higher in the long term but certainly may go lower before they do. While the media focuses on short term issues these often are social rather than economic or financial in nature. Long term I believe the markets will move higher based upon corporate earnings and the general business climate. Both corporate earnings and corporate cash remain at record levels. Consumer spending and savings are up and personal debt continues to drop. Perhaps most important is the amount of innovation that is occurring in the United States ranging from 3D printing to genetic engineering and affordable tablet computers. Both the pace and amount of innovation continues to increase generating opportunities and revenue for both consumers and the markets.
The bottom line is that many people seem to like to worry. When the markets are down they are concerned that they will fall further and when they are up they worry about a correction. In the end the key is to stay allocated based upon your needs, objectives and risk tolerance and ignore the media and short term trends. If you have questions or concerns share them with your financial advisor – if not then enjoy the summer!
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected