Market Condition & Financial-Services Sector
Overall Market Condition:
There is much concern about the direction of the current market these days. A key element to consider when investing in the market is to put any moment in time into a bigger context. For example, the years 2000, 2001, 2002, were historically some of the toughest years the market endured. Some investors in the market lost upwards of 60% of their portfolio value. It was only the 3rd time in history the market saw a negative return for 3 consecutive years. Despite those tough times the resilient US market came back to reach all time highs the following years. The year 2007 was a positive year for the market; however, we are now seeing the convergence of a few negative months in the market coupled with the ongoing residential real estate crisis, political attacks, and higher oil prices. These various factors are creating a substantial negative sentiment overall with regards to market conditions. While no one knows exactly where we will end in 2008, historically speaking, election years have resulted in positive returns for the market.
How low will the market go?
Of course no one knows for certain; but, here are some indicators that guide Allgen’s investment approach.
1) Even after the Bear Stearns news, the market had strong positive performance last week. (March 17th -21st, 2008)
2) Historically speaking, the market bottoms when the public and media sentiment reaches heightened levels of fear.
3) The S&P is down approximately 15% from its high in October 2007. The last 12 times this occurred the market rebounded strongly. (see chart below)
Overtime, the U.S. economy and stock market have proved fiercely resilient in spite of the numerous obstacles that they have encountered. From the â€™87 crash, to the Asian crisis and Long-term Capital meltdown in the 90â€™s, to the bursting of the tech bubble and the September 11 attacks, the market has generally found a way to eventually overcome adversity. Although it may be difficult, we do not believe longer-term investors should let fear override a sound investment strategy.
About Charles Schwab’s Financial Condition:
Many financial institutions in the financial-services sector have recently been hit hard by the subprime market. Therefore, we want to provide you some insight on how this has affected our custodian Charles Schwab & Co. Please read a recent article published in CFO Magazine by going to: http://www.cfo.com/article.cfm/10754978.
Information on this site is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The identification of specific funds and model portfolios is being made on the assumption that an investor would participate in that investment on a long-term basis (in excess of four years). With respect to any such identification, there can be no assurance that the fund or group of funds will in fact perform in the manner suggested by the investment profile provided with that fund or group. Opinions expressed on this newsletter or Allgenâ€™s Website is subject to change without notice and, due to the rapidly changing nature of the security markets, may quickly become outdated.
For professional investment advice on this topic contact:
Allgen Financial Services, Inc.
888.6ALLGEN (888) 625-5436