Ahhhh, 13,000!

March 1, 2012

“After bouncing up and down around the 13000 level for a week, the Dow Jones Industrial Average finally closed above that psychologically important mark for the first time since May 2008.”

That’s what The Wall Street Journal says in its online edition about the February 28 market close. But is closing above 13,000 really psychologically important?

The short answer is that for the pros, no, it isn’t. They’re busy drawing conclusions from the facts hiding behind the milestone. The twin specters of U.S. recession and European debt collapse are fading. The Dow is up 22% since October and 6.4% since the beginning of 2012, the strongest rise to start the year since 1998. Will it continue?

On the plus side, there’s another bailout for Greece, rumors of a renewed Federal Reserve bond buyback should the economy show signs of weakness, declines in borrowing costs for Italy and Spain, and a 12-month high in the Conference Board’s index of consumer confidence. On the minus side, the slowing growth rate of corporate profits, fears that China’s real estate bubble will pop, rising oil prices, and the plain fact that stocks have been rising for five months and could be due for a correction.

So the answer to “Will it continue?” is, as usual, maybe.

And if 13,000 isn’t psychologically important for the pros, is it for the Main Street investor? Probably it is. Consider the five-month run-up that led to 13,000. In the past few weeks it has finally brought the Main Street investor creeping back into the market.

Here are some ways the average investor can avoid letting the psychological component override the facts: 

  • Pay attention to valuations, the most fundamental measure that moves stocks.
  • Remain focused on broadly diversified portfolios with exposure to multiple asset classes.
  • Focus on long-term goals and stay invested.
  • Avoid the “herd mentality” of jumping on the most recent investment bandwagon.


James Copenhaver, Director of Investment Management


Sources: Optimism Drives Dow Past Milestone; Main Street’s $100 Billion Stock-Market Blunder

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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