Recent Market Commentary in Volatile Times

August 11, 2011

In the past weeks and months, U.S. investors have been confronted with what seems like never-ending bad economic news.  In a long line of setbacks, Standard & Poor’s (S&P), one of three independent providers of credit ratings, decided to lower the long-term debt outlook for U.S. debt to a rating of AA+ from AAA.  These ratings have little meaning to the person on Main Street except that the headlines reinforce that times are not as good as we would hope and that, collectively, the U.S. economy and the U.S. government have a long way to go before we can again feel positive about our futures.

Every time we’re confronted with a new set of problems, that sinking feeling returns and people may wonder “Am I doing the right thing?” or “Should I change course?”

While Standard & Poor’s downgraded the long-term U.S. debt, the other two credit rating agencies, Moody’s Investors Service and Fitch Ratings, reaffirmed the AAA rating.  In the midst of more economic problems in Europe, a stock market correction and indications that the growth of the U.S. economy is slowing, investors sought U.S. Treasuries as a safe haven.  Our conclusion is that regardless of S&P’s comments, the rest of the world sees the United States as one of the best and safest places to hold assets. S&P indicates that the dysfunctional state of U.S. politics was as big a factor as the debt issues in imposing the downgrade.

We’re not here to convince you that we as a country don’t have issues or that it will be a smooth ride to recovery, but rather, that we wouldn’t count out the resolve of the U.S. investor and the ingenuity of U.S. companies to continue to find value and provide products and services to the global market.

This is the third time this year we have experienced significant downturns in the U.S. markets and have seen the resiliency of the stock markets, investors and the U.S. economy.  Many people may feel this is 2008 all over again.  We don’t share that opinion for several reasons.  The banks are in a much better position than they were then, U.S. companies are well positioned with cash to take advantage of opportunities, and even when it seemed the darkest in March 2009, the U.S. economy and its citizens were able to meet the challenges.

Today, as countries continue to struggle through tough economic choices, we’ll continue to look at the long-term picture and opportunities these uncertain times present to position investments.

At Wealth Enhancement Group we believe in planning for the certainty of uncertainty; no one can predict with accuracy what will happen in the short term.  For this reason, we work as your advocate to structure your financial plan so that if you need money, you have a smart place to get it from. Please do not hesitate to contact your advisor team with questions.


James Copenhaver, Director of Investments

Wealth Enhancement Group