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Market Trends

Eugene Wehrheim | Monday, November 2nd, 2009

This has indeed been quite a year. A year ago at this time our world was beginning to spin in spiral that had most of us on the edge of our seats. The recent recovery we’ve had in the equity markets has taken some of the tension off, but each downturn we get, no matter how small, the bears come out and start feasting on whatever problem they can find.
Our equity markets have recovered to a point that brings us very close to where we were a year ago.  How many of us would have thought that possible when the lows were being reached in March?

Investing in the equity markets can be a very formidable and daunting task.  That is why the upside return potential is so good.  We get paid to take risk.  No investment risk today comes in the form of a three percent plus ten-year treasury bond.  Some people are willing to settle for that.  As long as inflation stays at these low rates it is not such a bad return.  However, there is a camp of people that believe that inflation remains a great possibility in which case ten year bonds at three percent could be something of a problem.

A trend that we are beginning to see is for investors to be willing to buy blue chip, high dividend paying stocks for income instead of bonds.  It is not too difficult today to get a three percent dividend on a stock.  The stock dividend also has some potential favorable tax treatment if it is a       qualified dividend.  Of course these dividends can be cut in the future and the stock can appreciate or depreciate in value.  Tax laws can also change, but many times we have to go on what is happening at the moment while making our best guesses about the future.

We are coming into the earning season releases for a lot of stocks so the bumpy road will probably not be any smoother over the next month.  October has been a volatile month for the stock market in the past.  We see no reason why this year should be any different.  But remember if it all looks too rosy and everyone wants to get in, that is the time to start looking toward the exits. 

As far as a V-shaped recovery, “W”, “U”, “L” or whatever letter you choose for the future, the fact is that to present from March lows, the recovery looks a lot like a “V.”  Could that change?  You bet.  Could the “V” turn into a “W”?  Sure.

We have recovered very quickly in the stock market.  Are we at a point where we could blow off some steam?  Sure.  Could we continue to make gains as money on the sidelines gets tired of the low money market and C.D. returns?  Sure.

Keeping well diversified with some money in safer areas and some money at risk probably makes sense to most of us.  You and your various financial advisors need to make that determination for yourself.

In closing, I would like to share a couple of quotes with you. 

“Ask five economists and you’ll get five different answers (six if one went toHarvard).”   
 - Edgar R. Fielder

“Economics is extremely useful as a form of employment for economists.”                               
- John Kenneth Gilbraith         

Securities and Advisory Services are offered through Nations Financial Group, Inc (NFGI) member FINRA, SIPC.  Mr. Eugene V Wehrheim, Jr is a Registered Representative of NFGI.  The Wehrheim Group is a separate entity and not affiliated with NFGI.

The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.   NFGI did not assist with the preparation of the content in this article, and its accuracy and completeness are not guaranteed.  The opinions expressed in this article are those of the author(s) and are not necessarily those of NFGI.  Any information provided is general in nature and is not tailored to your individual investment objectives or needs or relate to any specific investments. Any investment(s) or strategies discussed may not be suitable for all investors.  Investors must make their own decisions based on their specific investment objectives and financial circumstances.

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