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Bad News Overwhelming Good News In Our Economy And Stock Market | Chris Harkins

It never seems to fail when current news becomes loud and negative, some investors, even those with thick skin, begin to feel the pressure. The negative news is everywhere, with Europe’s digestion issues and a stubbornly high unemployment rate here, these combined pushed stocks lower. Lost in the headlines are several recent and potential long-term positive stories. Just three months ago, in March, oil prices stood at $110 a barrel and folks were calling for $5 a gallon at the gas pump. Today, oil is sitting close to $80 a barrel and gas at the pumps are bouncing near $3 a gallon. The other good news, on perhaps a more intermediate level, has been corporate earnings. Over the past several quarters, going on close to two-plus years+, corporate earnings have been quite strong. In fact, some companies have announced record earnings. An emerging positive intermediate and long-term story is the discovery, over the past several years and continuing today of natural gas in North America. It is estimated by some that we’ve discovered as much 100 to 150 years supply of natural gas throughout the United State and Canada. This could be a bullish story for our economy and employment. Some analysts estimate that the Untied State could be energy independent by 2020. If this should happen, think about how much money would stay in the U.S. We’ve already seen jobs and billions of dollars in Arkansas from the Fayetteville Shale Play.

Lower energy expenses help companies reduce fixed costs. This allows them to allocate elsewhere, such as machinery, computers, hiring, raising dividends or buying back shares, just to name a few. If you and I are spending less money filling up our gas tanks and cooling our homes, then that money moves to other areas like savings, paying down debt, investing in retirement or other needs and general spending.

The November election is another distraction. Similar to 2010, I would look for any stock market reaction beginning around September to gauge investor sentiment towards a possible outcome. We look to navigate what is in front of us, based on the experiences of the past. I refer to a comment from a money manager that has an interesting website with his thoughts on investments, news and economic-related events. He likes to think of himself as a sailor (I’m paraphrasing) and regardless of what comes our way, throughout our investment life; volatile markets, low or high interest rates, geo-political flare-ups, high or low commodity prices, etc. A good sailor (investor) learns, over time to choose to act or avoid current conditions with an eye on your ultimate destination. It is typically these sailors (investors) that handle the ups and downs, positive and negatives over time, combined with a little luck, that tend do better than most. Certainly we will be pleasantly surprised or disappointed our whole lives while investing. Yet it is ultimately our reactions to these events that tend to have at times, significant effect.

I’m reminded of other long stretches when the stock market* underperformed. Such as during the Depression, when stocks sold off in 1929, only to return to previous levels 13 years later. The 1970’s were famously rough, as the stock market averages* stalled from 1966 until 1982. And our current “bear market” starting in 1999/2000, continues to plague us today, 13 years later. On the bull market-side, stock markets have experienced tremendous rallies like the early 1940’s to 1966 and 1982 to 1999.

Despite a flat stock market over the past dozen years, several sectors performed quite well such as commodities, emerging markets and bonds. If you had shifted some of your assets in your portfolio over the past 12 years, it should have helped your portfolio performance.

Always know what you own, surround yourself with calm stewards, look to declines in the stock market as potential buying opportunities and navigate the various investment classes for a better portfolio.

So, like the author using a sailor analogy, we move forward based on the information at hand, adjusting for each of our client’s objectives and risk tolerance, look to historical reference and enjoy all of the luck we can get.

Good sailing!

To find out more about this topic, click here to watch Chris’ video with Today’s THV.

Chris Harkins
Senior Vice President/Managing Director
Delta Trust Investments

*Thomson Financial

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