CI Outlook - Archives

June 2011

June 6, 2011

Today’s economic news mantra is double dip or soft patch.  So far this year the Dow Jones Industrials have almost traced out a double dip of their own.  Starting in January, at 11,600, they rallied 4% only to fall back in March to the years starting point.  Then the market rallied 10% only to give back more than half of that gain in the last few weeks.  If the decline continues, as many bears predict it will, the Dow will soon be back at its starting point for the year.  In that case we must say so much for the “presidential election” cycle market theory.  According to its adherents the market should be up twenty percent this year.  But the basis of the theory, simulative Federal Reserve and Congressional policies, have been ongoing for several years now and the economy is not growing at the desired rapid rate.  In fact the economic growth rate is slow and apparently slowing.  But despite these economic headwinds, corporate earnings continue to hold steady or expand. 

We think this economic slow-down is the news the flagging markets have been predicting.  It is the reason why we liquidated positions in March and April and still hold most of the proceeds from those sales in cash.  We want to stress that we have held, and continue to hold the opinion that the economy is still growing, but at an excruciatingly slow rate.  This is unnerving, but most likely will not result in the dire outcomes put forth by the most vociferous members of the bear camp.  Expanding corporate earnings, record low interest rates, and the lack of any other reasonable investment alternative will continue to funnel cash into the equities markets.  Therefore we plan to use this economic slowdown and resulting market weakness to add positions as opportunities present themselves.

Thank you for your continuing patronage.  Please call us whenever you find it convenient as we welcome the opportunity to discuss your investment account with you.

 

CJ Brott               Karen Burns

 


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