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All posts in Market Trends

When the stock market experiences extreme volatility, an investor’s best bet is to focus his/her energy on factors that can be controlled. Unfortunately, many investors panic-sell and lose their money. When the market rebounds, many investors are left wondering if it’s the right time to get back in.

Your best bet during turbulent markets is an investment of time. You want to invest in time to see where you stand now, and, if you determine changes are in order, thoroughly research your options. Here is a three-step checklist to manage your investments during turbulent markets. Read more


stockWritten by: Jeremy Shafer

“In the short run, the market is a voting machine.  In the long run, it’s a weighing machine.” -Benjamin Graham

The Dow Jones Industrial Average topped the 15,000 mark for the first time ever.  It’s quite a milestone, yet many are wondering if the rally has run out of steam.  Let’s begin with a simple fact: no one knows what tomorrow will bring – not MSNBC, Fox Business, or any of the other talking heads (this one included).

But smart investing isn’t (and hasn’t ever) been about knowing the future – it’s about seeing the present with clarity, as Dr. David Kelly put it.  And presently, stocks are trading near their historical average.  In the past, stocks selling at this price level were a mixed bag over the following 1 year period, with some gains and losses.  The telling picture is in the 5 year period, where stocks have generated healthy returns when selling at/near current prices, though periods still experienced losses.

The markets may serve up a bumpy ride, but long term investors with an allocation strategy in place should be well positioned going forward.


Written by: Jeremy Shafer

As February winds down, we will be treated to yet another spectacle from the nation’s capital.  This one goes by the name Sequester.

To quote Yogi Berra, “It’s like déjà vu, all over again.”

A few things seem important to remember as the debate heats up:

  • It seemed like a good solution in 2011.  The President proposed it and both Democrats and Republicans voted for it.
  • Sequester is a spending cut by abnormal means.  It forces (perhaps indelicately) some of the spending cuts that most Americans agree we need – even if we don’t want them.
  • Replacing sequester is simply trading for the devil we don’t know.  Rest assured any measure that could pass with bi-partisan support would contain some form of spending cuts and increased revenues that will look as undesirable as sequester.

Simpson and Bowles’ updated plan is worth reading, though it’s unlikely to be the basis for a bill in the house or senate.  Mike had a chance to hear them at the last Schwab conference and shared his thoughts.

Whether we get this plan, a new plan, or sequester, the end result we all hope for is a stable path for American prosperity.  That will require some uncomfortable adjustments.  Here’s hoping we make sensible progress in the next seven days.


A-Color-Coded-Look-at-the-SP-1926-2012

In January, the market had a positive return.  The January Effect means what happens in January usually foreshadows what will happen for the year.  We found this fun diagram that shows the Monthly Totals in color coded form.  Of the 87 years that is listed on this chart, 55 of the years had a positive January.  Of those 55 years, 46 of them (about 84%) had positive returns over the next 11 months.

Here is to a positive 2013!

 


Kiplinger.com has a terrific short tool on their page that will ask you a few questions to help guide you and your financial adviser in the right direction according to your risk tolerance level.  While this tool in no way goes into enough detail for you to make long-term decisions, it is still a nice check to see where you stand.

It’s quick and easy and well worth the time to take a peek!

Click here to fill it out!


Liz Ann Sonders, Senior Vice President, Chief Investment Strategist with Charles Schwab & Co., Inc. has written a nice commentary article regarding the recent announcement by the fed of “Operation Twist”.

Please click here to read this commentary.


Mark Riepe, CFA
Senior Vice Prsident, Schwab Center for Financial Research
President, Charles Schwab Investment Advisory

 

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative (or “informational”) purposes only and not intended to be reflective of results you can expect to achieve.

Diversification does not eliminate the risk of investment losses.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, political instability, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

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Respect the price action but never defer to it.
Our eyes are valuable tools when trading but if we deferred to the flickering ticks, stocks would be “better” up and “worse” down and that’s a losing proposition.

Discipline trumps conviction.
No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always attempt to define your risk and never believe that you’re smarter than the market.

Opportunities are made up easier than losses.
It’s not necessary to play every day; it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

Emotion is the enemy when trading.
Emotional decisions have a way of coming back to haunt you. If you’re personally attached to a position, your decision making process will be flawed. Take a deep breath before risking your hard earned coin.

Zig when others Zag.
Sell hope, buy despair and take the other side of emotional disconnects (in the context of controlled risk). If you can’t find the sheep in the herd, chances are that you’re it.

Adapt your style to the market.
Different investment approaches are warranted at different junctures and applying the right methodology is half the battle. Identify your time horizon and employ a risk profile that allows the market to work for you.

Maximize your reward relative to your risk.
If you’re patient and pick your spots, edges will emerge that provide an advantageous risk/reward profile. Proactive patience is a virtue.

Perception is reality in the marketplace.
Identifying the prevalent psychology is a necessary process when trading. It’s not “what is,” it’s what’s perceived to be that dictates supply and demand.

When unsure, trade “in between.”
Your risk profile should always be an extension of your thought process. If you’re unsure, trade smaller until your identify your comfort zone.

Don’t let your bad trades turn into investments.
Rationalization has no place in trading. If you put a position on for a catalyst and it passes, take the risk off—win, lose or draw.

By: Todd Harrison


US investors are beginning to rethink the composition of their portfolios and become more risk averse. If people become more conservative, that could possibly create a deflationary environment, which is a positive for bonds, not for equities. Corporate earnings have been strong throughout this this crisis. If you would like to learn more, click here to go to an article from International Financing Review.


Terrific video from Morningstar regarding the current bond trends.