Yesterday's strong stock market performance was a great way to start off the week...as almost every one will see when you get your end of the month investment statement in a few days, March has been a good month for stocks in general. As it stands now, the first quarter of 2012 is shaping up to be one of the best market performance quarters in the past 14 years. That's pretty amazing considering all that has transpired with respect to the financial instability in Europe, geopolitical issues in the middle east, stubbornly high unemployment in the U.S., high gas prices, and the slow and uneven economic recovery we are seeing.
Sometimes I think watching the stock market and the way "it" behaves is similar to watching a movie and thinking you know the whole time how everythings going to come together at the end and then come to find out, what you thought would happen (based on all that you've seen) never did, and you were left stratching your head...just like the stock market. Now I've been writing all along that I think we are seeing an uneven and slow economic recovery take place, but I've also remained cautious because I don't want to get too over ambitious with respect to my outlook on stocks. It appears that the housing market is seeing signs of stabilization, corporate profits have grown, and overall consumer spending has risen. Now, all that being said, if you've made some money over the past 3 months or so, please take some profits. I've been heavily invested in the financial sector over the past 6 months, and while owning those stocks didn't make me any money for a while, the investments have paid off handsomely over the past couple of months. I'm not selling all of the financial stocks I own, but I am trimming a little off the top per se. With respect to Mutual Funds, I also think it is prudent to sell 1/3-1/2 and let the money sit in cash until we see the markets take a little breather.
The Chairman of the Federal Reserve Ben Bernanke (who happens to be from the great state of South Carolina) was in the news yesterday talking about how despite the growth we are seeing in the economy, he is still concerned about the high unemployment rate. He discussed how the Federal Reserve, which is the economic and monetary governing body of the U.S., were committed to keeping interest rates at low levels for an extended period of time. This is great because it allows individuals like myself to refinance or buy things at low interest rate, but if the economy doesn't start to see more robust growth and the employment picture improves, then stocks are going to get hurt. This probably doesn't make a lot of sense to most people, but the unfortunate thing about investing (or managing money) is that EVERYTHING is connected and something so vague as "high unemployment" will impact the way in which your investments perform.
I'm only saying all of this because at some point the markets are going to sell off. It's been a great quarter to be heavily invested, but sooner or later the punch bowl at the party will be empty. I am still a firm believer in our economic recovery and in the prospects for stock price appreciation, but I would not throw caution to the wind. Corporate profits are still vulnerable, elevated gas prices are affecting consumer spending, the housing market and unemployment are still of concern, and therefore take some profits off the table.
I was listening to the Pink Floyd album Dark Side Of The Moon this morning, and the song "Time" came on and it got me to thinking that it's only a matter of time before things aren't as rosy as they seem. I absolutely think now is a great time to be invested in stocks and Mutual Funds, but not heavily or aggressively. I have no idea whether the markets will continue their upward trend over the next month, but for the time being I'm taking profits.
Btw I highly recommend the Dark Side Of The Moon album...good stuff
