It’s tempting I admit. Bonds are flat to plus or minus a few points from recent memory. Everything else – pretty much EVERYTHING – way up! My how I reminisce of recent peaks. That’s not to say this is one – or I would even remotely predict one. But seems an awful lot like the lat 90′s when tech was soaring and bonds were flat to something… Or the recent bear market – stocks, real estate – it felt like everything was on fire and bonds were ho humm……..
The fact is – things have been really really good from an equity standpoint since early 2009. That’s two full years of pretty good returns. It’s ever so tempting to pile money into the markets…. ever so tempting!
Planning first! Investments are tools used to accomplish financial goals which take both money and planning to achieve (like a financially inspired retirement for example!).
Following that logic – I wouldn’t change a plan based on recent market events. That can only lead to long term risk and potential financial catastrophe…
Another quick little thought from Weston Wellington at Dimensional Fund Advisors – DFA Funds. This is shorter and not quite as fun to read as other posts he puts out – but in fairness he set his own bar pretty high!
ANOTHER BRICK IN THE WALL
Bit by bit, the recovery from the traumatic stock market slump in 2008 and 2009 continues. Although broad-market indices in the U.S. have yet to regain their previous peaks, the gap is narrowing as some industries and companies regain strength more quickly than others. The S&P 500 Index and Dow Jones Industrial Average remain below their all-time highs by 13.4% and 10.4%, respectively, but a growing list of stocks are not only recovering but setting all-time record highs, including widely held firms such as Costco Wholesale, Cummins, Honeywell, IBM, Union Pacific and W.W. Grainger in yesterday’s trading alone [April 27th]. For small company stocks, the comeback is complete: the Russell 2000 Index established an all-time record high of 858.31 on April 27th, eclipsing its previous peak of 855.77 set on July 13, 2007. Through April 27, the index is up 150% from the darkest days of March 2009, and total return from March 2009 through February 2011 was 117.4%, the strongest 24-month period since inception of the index over thirty years ago.
We don’t know if the current strength in stock prices is an indication of even higher prices in the near future. But if recent performance reflects a so-called “new normal” pattern for the economy and the equity markets, it looks to us a lot like the “old normal”—dramatic changes in prices that confound most investors in their efforts to predict them.
Bit by bit, the recovery from the traumatic stock market slump in 2008 and 2009 continues. Although broad-market indices in the U.S. have yet to regain their previous peaks, the gap is narrowing as some industries and companies regain strength more quickly than others. The S&P 500 Index and Dow Jones Industrial Average remain below their all-time highs by 13.4% and 10.4%, respectively, but a growing list of stocks are not only recovering but setting all-time record highs, including widely held firms such as Costco Wholesale, Cummins, Honeywell, IBM, Union Pacific and W.W. Grainger in yesterday’s trading alone [April 27th]. For small company stocks, the comeback is complete: the Russell 2000 Index established an all-time record high of 858.31 on April 27th, eclipsing its previous peak of 855.77 set on July 13, 2007. Through April 27, the index is up 150% from the darkest days of March 2009, and total return from March 2009 through February 2011 was 117.4%, the strongest 24-month period since inception of the index over thirty years ago.
We don’t know if the current strength in stock prices is an indication of even higher prices in the near future. But if recent performance reflects a so-called “new normal” pattern for the economy and the equity markets, it looks to us a lot like the “old normal”—dramatic changes in prices that confound most investors in their efforts to predict them.
I’ve built my firm and my reputation on solid planning, excellent client service, and implementation and management of world class institutional investment tools such as DFA Dimensional Funds for clients here in Las Vegas, Henderson, and nationally. The market events – good or bad – will not shake that!
Greg
