1) Is the stock market headed for a correction?
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Comments on previous post of 3/4/2011:
Oil prices did indeed continue to rise jumping about 7% in a month. As the ECB increased its overnight lending rates the dollar went from $1.39 to $1.44 against the Euro, a drop of 3.4%.
Comments on the economy:
As in 2007, the weaker dollar contributed to higher oil prices. If the dollar breaks support and starts to drop at a faster rate (from ECB hinting at higher rate while weak employment in the US keeps interest rates low); then we will see higher oil prices for while to come.
This week's economic data was not as bad investors and speculators expected. The mood in Wall Street changed from concern to relief. Hope is revived that the economy is rebounding. Tomorrow's job numbers will (hopefully) give a clear direction.
This coming week will provide new economic data points: existing home sales on Tues., durable goods orders on Wed., and GDP figures on Friday. Recent data from the economy has been lukewarm while corporate earnings were healthy. Would the economy improve as corporations spend their cash hordes to invest in new businesses and hire more employees or would they use their cash to buy other companies through M&A.? What are the implications for the financial markets?
Markets in the US do not seem to know which way to turn.
We have an interesting situation where companies in general have figured out a way to make more money with less while the the average Joe has a hard time making ends meet or finding a job.
Would it last? in other words, for how long can companies continue growing profits while the average Joe has a hard time? 2 quarters? 6 months? A year? A few years?
Can US companies continue to do well in light of poor economic conditions in the US? What role does globalization play in this situation?
"Sell in May and go away" is an axiom that is often repeated in Wall Street. What are the chances it will ring true this year? Why did Wall Street come up with such an axiom?
What is our take on it? Please let us know.