Market Insights

After a strong 2010, the market continues to edge forward.  We continue to see signs of economic improvement. In simple terms – the market is doing better because the economy is doing better. In Liz Ann Sonders’ (investment guru with Charles Schwab) latest piece she sums it up quite nicely….

• Economy moves from recovery to expansion, but well below potential
• Inflation concerns more an issue as double-dip fears subside
• Unrest in Middle East and volatility may temper optimism, leading to the positive “climb the wall of worry”

 I’ll summarize her points below (Click HERE for her full article)

GDP was up 3.2% in Q4, a continued move in the right direction. The bottom line is that manufacturing is increasing, while construction-related economy continues to struggle. While operating below potential, it’s still positive none the less.

On the inflation front, we see food and energy inflation rising. That said, there is excess capacity in the economic system (specifically high un-employment) that should keep “core inflation” in check.

Instability in the Middle East is having a negative impact on oil prices and could heighten volatility.

In summary, there are many positives, as always, there remain elements of caution (Egypt, Greece / European Debt, US Deficit).   We remain optimistic about the market, but are concerned in the short-run about the elevated optimistic view of everyone. Any one of the “words of caution” may lead to a pull back. 

As we’ve discussed in the past, in a “Normal” market, has both 5% (3-4x per year) and 10% (1x per year) corrections. Our expectations would remain the same for 2011.  You can’t predict these corrections, but you can Plan for them.  If you’d like a FREE FINANCIAL ROADMAP to find out if you’re on track Click HERE.