Last week, there was a lot of positive sentiment about the economy – the market was reaching great highs, real estate continued to improve, and unemployment numbers were better than expected. Money that’s been sitting on the sidelines for the last several years has begun to trickle back into the market as investors become more confident in where things are heading. While this is all positive at the moment, I look at the market with caution and see this as a time to start pulling money out and into other investments.
Many analysts are calling the current market period a Hop, Drop and Pop market. Right now, we’re experiencing the HOP, but we all know that what goes up must come down (in many cases, the fall is harder than the rise), so the DROP is around the corner. Some are saying this drop could be around 10%, followed by a POP of the market into mid 2014.
What will cause this DROP? There are many things happening in the economy that will factor into near term market conditions:
- The budget impasse in Washington
- The European debt crisis
- Quick market gains that are often followed by less positive returns
Don’t get me wrong – we love a great market, which is positive for investors and the economy as a whole. However, history tells us that when the market (in particular, the S & P) rises greater than 5% in the first two months of the year, the typical gain for the rest of the year is 4.2%, as opposed to 10.9% when that rise is less than 5% for the first two months of the year.
We expected 2013 to be a year of pulling some money out of the market and into other investment products, but we expected we’d start doing this about two months from now – so it’s happening a little sooner than we thought. Because we actively manage our clients’ money, we’re able to be proactive for you and give timely advice on when, how and where your investments can be most effective for you.
I look forward to answering any questions you may have, and will continue to work hard for you to help you reach your retirement goals. We appreciate the opportunity to serve you, and would welcome a chance to help any of your loved ones with their investment and tax needs.
Thank you for your trust in Wamhoff.
Wamhoff Financial Planning & Accounting