Today on Capitol Hill, the Chairman of the Federal Reserve Ben Bernanke (who is from Dillon SC) is testifying before Congress about how the U.S. Economy is continuing to struggle under the weight of the poor housing market and elevated unemployment rate...The Chairman is also saying how the average person is still having problems getting credit or loans from banks and lenders and therefore the housing market and those who want to refinance will continue to have problems doing so. Another serious issue we are facing is the gridlock that is currently going on in Washington with respect to our country's increasing debt levels and whether or not the Republicans and Democrats can come together and compromise so that the anemic economic growth that we are seeing won't falter.
Because of the lack of direction seen in Washington, and due to the numerous other "headwinds" facing our economy, I am confident in the expectation that the stock market will continue to move in a sideways manner for the remainder of the year. Headlines, such as yesterdays news on Italy's debt, will influence the days and weeks stock prices, but soon following the market will show no memory from day to day and will trade up and down based on the release of another morning headline.
The tug of war between the cyclical recovery in corporate profits and the nontraditional headwinds facing the world's economies will continue to be a relative standoff and frustrate those with strong directional opinions.
With all this going on, this is not an investable stock market for those who are of the "buy and hold" mentality, but it IS an excellent setting for those who are opportunistic in their approach to investing. For that reason, we will continue to tactifully look to move in and out of the market as economic and worldy situations unfold. Our current strategy is to own certain "special situation stocks" where we expect takeover and acquisitons to occur, whether in the financial or technology sectors. The region of the world which is exhibiting the greatest prospects for growth right now are in Japan. Over the past decade, Japan has seen tepid growth in their economy, but in light of the reconstruction that is taking place because of the earthquake that happened, and with technology becoming such an important part of our society (which Japan is known for their technological industry), we will be looking to add some exposure to the region in our investment scheme. This will be seen in either us buying Asian mutual funds or in individual stocks we may find attractive. As always, this is subject to change depending on the economic developments that we see over the coming months, because when the facts change, we have to be prudent enough to change our investment thoughts and strategies.
