We all know that the stock markets go up and down. Of course, we only want them to go up. This last slump has been very interesting. I have several aggressive overseas investments that have fallen deeply, but that is what aggressive investments do – they go way up and they can fall way down. So, I am not surprised that I took such a big hit. My Roth is heavily laden with foreign ETFs that follow developing and emerging markets. My 401k is slightly less aggressive.
Europe is worried about the value of the Euro and whether the Euro can withstand the weaker nations pulling down the stronger economies. Most of Europe already has many of the same type of entitlement programs and tax spending pressures that we have and for much longer. So, their troubles are a little more complicated; much more than this mind can decipher.
I think the effect of European economies on our domestic markets is overstated. I agree that there exists a real global economy, but I think that the US recovery is continuing, as slow as it may be. Orders for durable goods are up, unemployment in some areas is down, growth estimates for the US economy is 3.2%, higher than previously forecasted. Home sales were up, but I am guessing the stimulus credit probably helped there with the next few months probably showing a drop in sales rates. We are such an impatient lot. I believe in the entrepreneurial spirit. Capitalism, with all its detractors, still finds a way to create wealth, which leads to opportunities. However, I know there is a lot of pain and suffering out there as the economy works its way to find a new sense of normalcy.
Many are afraid to invest now. If you have a long time horizon, more than 10 years, I would stay in the market. By putting in money month after month and diversifying your investments, you take advantage of today’s low prices. If I had less than 10 years until retirement, I would still stay in the market, but with more conservative investment choices. We have had many downturns in our economic history and are bound to have more.
So join me on the Stock Market Elevator as it goes up and down. Let’s just hope that when we step in together, the operator says, “Going up.”