CI Outlook - Archives

June 2010

June 2, 2010

 

Last month we wrote saying if the Dow Jones did not hold 10,800 we thought it could decline to about 10,000.  Three days later that proved to be the case.  The 15 minute 900 point decline, now being called “the flash crash” was quick dramatic and terrifying.  Before that day the markets already had plenty to worry about.  Now many investors are concerned that we are returning to a financial meltdown such as we had in 2008.  We do not think our financial system is in danger as it was then.  While European bankers have been slow to recognize their problems the US banks took steps to shore up our financial system during the 2008 crisis.  While Europe’s problems will continue for some time we think the US system is sound.  As this becomes more widely recognized we look for investor fear to ebb and confidence to return.  In our opinion a period of time spent fluctuating quietly in a narrow range around current market levels should restore investor confidence.

In the last few months many investors have fled the stock market and have moved their money into bonds.  Although this may reduce portfolio volatility in the short term, it will not provide protection against future inflation or rising interest rates.  As you know we are holding some bond or fixed income investments in your account.  These investments have provided income while reducing portfolio volatility.  This balance was constructed to be suitable for your particular investment needs.  Therefore we do not anticipate fleeing equities and adding more bonds to your portfolio.  Our plan is to hold current positions and await higher markets as headline hysteria calms down and investment confidence returns.  We are anticipating higher prices in both domestic and overseas markets.  That confidence is based on decreasing volatility, higher corporate earnings and continuing economic growth.

We plan to monitor developing events and make investment decisions for your portfolio as the situation warrants.  Please accept our thanks for your continuing patronage and call us with any questions or concerns.  We always enjoy hearing from you.

 

CJ Brott               Karen Burns

 


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