November 2011 Peak View Newsletter
from Jim Onorato
After a 10% surge in the stock market in the month of October, the S&P 500 has promptly given back about half of October's gains so far in November. Although U.S. companies overall reported good earnings for the third quarter fueling October's rally, the economic crisis in Europe which has dominated the headlines has caused fear and uncertainty to return to the market once again.
The debt crisis in Europe is like a slow motion car crash and our market is trading on its daily headlines. Although I believe there ultimately will be a resolution, it will probably continue to drag on for a long time. Getting the seventeen countries that make up the Eurozone to cooperate together is not an easy task. The United States is (in theory) one united country and we have our own challenges coming to resolutions. Unfortunately as far as Europe is concerned there is no quick fix.
I recently was invited to an investor conference for financial advisors sponsored by a major mutual fund company. This organization employs some of the best and brightest money managers in the industry. One of their top managers that spoke at the conference said he began his career in the investment business in 1971 and this is the most confusing and frustrating environment he has experienced in his 40 year career. So if you feel this way as an individual investor you are certainly not alone. He went on to say however that amidst all of the confusion, frustration and pessimism the only other time in his career when stocks were a better value than they are today was in 1982.
Listening to the daily headlines and trying to sort them out and react to them is maddening. As I have said in previous letters I try to remain focused on two things (1) our economy is slowly recovering and (2) stocks are very cheap historically and US companies are in excellent financial condition. It is difficult to predict when the market will break out of the trading range that it has been stuck in, but in my view the long term prospects for future stock returns seem very positive from these levels. The roller coaster ride that the stock market has had in 2011 has shaken investor confidence. The reality though is that through yesterday (Nov 18) the stock market as measured by the S&P 500 is only down 1.75% year to date. I think if you surveyed most people and asked them what they thought the market has done so far this year many people would say it must be down 10% or more. The daily headlines from around the world along with the dysfunction in Washington make us all feel worse than things really are.
My best advice is to stay the course with your investment plan and the portfolio asset allocation that is appropriate for your situation, turn off CNBC and focus on the things in your life that really matter.
Have a wonderful Thanksgiving.
Best Regards,
James Onorato
President
November 19, 2011