The latest catchphrase Wall Street is throwing around is “Muddling Through.” I cannot think of a better description of what is happening today in the world’s economy. It is obvious that policymakers are taking one step forward and then falling back one step. They may be avoiding a total collapse of our financial market, but at what cost? Even in the U.S., stocks appear to be in a trading range that neither allow the bulls or the bears to take control.
The question is, “When will the markets find a clear direction?” The answer: Not until the policymakers stop playing the “test your confidence” shell game and begin to make decisions which strengthen our country. An element which is in this year’s mix is the upcoming presidential election. It has been a LONG time since there has been this much discourse in the presidential campaigns and it creates major concern for public companies.
It is difficult for employers to gain a lot of confidence and few are willing to take additional risks by hiring new workers when they have so much uncertainty surrounding taxes, regulations and ongoing healthcare costs.
The labor market remains a focus as it continues to disappoint. However, there are some stabilizers that can help to stimulate economic growth when it slows. The lower oil prices help to keep money in people’s pockets — which raises optimism about the economy. Additionally, commodity prices (excluding corn) have come down.
As an investor, this may not sound like the best time to add to your positions or to invest in the stock market at all. However, it has been proven time and time again that when turmoil abounds—that is the best time to step in to the markets. Also, election years have historically produced positive returns. Since 1972, the stock market has rallied in 5 of the 8 election years, according to J.P. Morgan, with market gains of 12-26 percent. Warren Buffett – the Oracle of Wall Street—boasts endless financial experience and wisdom, and states, “Look at market fluctuations as your friend rather than your enemy.”
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