- the U.S. stock market has been performing extremely well for the past several months (close to a all time high)
- unemployment is at a 5-year low
- the housing market is looking good (something I wrote about back in the fall)
- corporate earnings, on the most part, have been good (consumer durables, restaurant/leisure, retail, autos and financials look good); technology, healthcare and defense don't look so hot
- the financial sector is in much better shape (in the U.S.) than it was early last year
- European leaders have begun to work together to control the financial calamity that has gripped Europe over the past year
- Growth in China AND certain parts of Latin America look strong (hence why we own the Mathews Asian Growth and Income Fund and why we will be looking to add the Fidelity Latin American fund to our client holdings in the near term
- the Presidential election is over so we don't have to watch anymore campaign ads on tv
The Not So Good:
- Apple stock performance has been UGLY (back in November I mentioned how Apple stock looked a bit extended and how I thought the company might be facing some problems as the explosive growth in Apple products may hit a tipping point (the company still hasn't seen a great deal of sales growth internationally so that could eventually help Apple's revenue and earnings)
- North Korea...sticky situation with them provoking South Korea and the U.S. and threatening war (watch this situation very carefully as this could affect - or is it effect I never know - investments in China/Asia)
- the politicians in Washington still have their heads in the sand and have done nothing to address our country's fiscal debt problems and have instead decided to kick the proverbial can down the road
- earnings out of Caterpillar, the maker of large earth moving vehicles and construction equipment were mixed this morning and showed uneven growth internationally (this was to be expected but I'd like to see a more smooth mix of international sales)
- the U.S. stock market has been performing so well that an eventually pullback in stock prices is inevitable (which is why we've been taking profits on our holdings over the past couple of weeks - buy low sell high and when the stocks pull back in price we will buy them again)
- if economic growth continues apace, which is a great thing, we might see interest rates start to rise
- the increase in payroll taxes (FICA), which everyone has seen the increase coming out of their paychecks could serve to hamper consumer spending
- and finally it is FREEZING COLD
We are currently sitting with approximately 40% of our managed money sitting in cash as we've been taking profits as the markets have risen. I expect we will see a slight pullback at some point and we will use that opportunity to add to any positions we have as well as initiate new stock investments as well as mutual fund investments (this will be where the majority of our investments will be focused b/c of the overall diversification offered by the actively managed funds) - on a side note, I recently met with a new client and in looking at his investments at his current management firm, he had (for example) multiple Large Cap mutual funds AS WELL AS Large Cap ETF's (exchange traded funds...these are like mutual funds but most of them are not actively managed). In my opinion, I think it is not necessary at all to own both a mutual fund of a certain type and a ETF of the same type...why not just go with the best actively managed mutual fund and stick your money there?
Here are a few examples taken from a new clients old statement from his previous investment advisor (actually the guy was a broker):
Why own two different mutual funds that both pretty much own the same stocks? Not to mention why would you own a mutual fund that has a 5.75% LOAD associated with it? For example, if you were to take $100 and invest it in the American Funds Growth Fund (which is not a great fund btw), you would only actually be investing $94.25 b/c of the initial load you are paying. Always try to stick with No Load Funds. And I have NO IDEA why someone would want to own two Large Cap mutual funds that are not even the best performing ones...you can go to morningstar.com and compare mutual funds and see how different funds compare to one another. And finally, I don't see the point in owning the Vanguard Large Cap ETF here b/c this client already had 2 Large Cap invesments!
American Funds Growth Fund – 5.75%
Touchstone Sands Growth – 5.75%
Vanguard Large Cap ETF
Anyway, enough of me and my soap box. If I see anything exciting happening today I'll post again but if not have a good weekend and stay warm!