Random Thoughts

The stock market is generally considered to be a leading indicator. That is, current market action reflects future expectations.

The stock market largely shrugged off the government shutdown and the hyperbole surrounding a possible default.

The apparent resolution of the October 17 “crisis” was to do it all over again early next year.

Talk of a “grand bargain”, reining in long-term entitlement spending in exchange for increased revenues, may not be realistic during the run-up to mid-term elections.

Spending, whether it’s you, me, everyone else, or our political class, is fun. Settling up, not so much.

Deficit spending, whether by individuals or governments, may be good for the economy and the stock market in the short run. Long-term, not so much (think Detroit).

Every dime the government spends and every loophole has an ardent beneficiary supported by an aggressive lobbying team.

Money is cheap, interest rates are at historic lows and a near-term change in Federal Reserve policy can best be described as a “definite maybe”.

Low interest rates translate into lower monthly payments for large purchases such as autos and homes.

The US is substantially energy self-sufficient and despite continuing turmoil in the Middle East, oil prices have been coming down.

A Not So Random Thought:

Investors should evaluate recent strength in equity markets in the context of their long-term investment objectives. Presumably, investors have developed a portfolio strategy, perhaps in conjunction with their advisor(s). Generally, strong markets can provide an opportunity to maintain pre-determined rebalancing strategies during market fluctuations. While the future is unpredictable, this is a strategy that has stood the test of time.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA