Print
Don't Be Fooled By Fickle Markets
Share this content with:
From the worst Thanksgiving week since 1932 [1], to the best weekly gain since 2009, last week illustrated how fickle the stock market can be. The Dow Jones Industrial Average finished up 7% for the week, bouncing back from a 5% loss the previous week on news about... are you ready for it... positive developments in Europe. Basically, several central banks made dollar financing cheaper through swap arrangements, and finance ministers took steps to expand the European Financial Stability Facility. [2] Just as bad news from Europe pushed markets down during Thanksgiving week, good news from Europe pulled markets back up last week. At this point, it should be clear to everyone that we are dealing with highly Europe-charged investor sentiment right now.
So does last week's rally mean we're out of the woods and the bulls are back on top? It's possible, but we don't recommend counting on it. While some analysts are expecting stocks to maintain their momentum on the "Santa Clause effect" (Stocks have risen in December nearly four out of five times since 1945, according to S&P Capital IQ, and have risen almost 2% in December after dropping in November - as they did last month), [3] most understand that Europe is still a wild card.
When we see encouraging news and market rallies, it is easy to become excessively positive when we should actually be cautiously optimistic. In the same manner, when we see bad news and steep declines, it is easy to become excessively negative when we should actually be moderately cautious. What is our point? In times of uncertainty and volatility, it is particularly critical to stick to a long-term investment strategy that aligns with your personal goals and risk tolerance. We encourage you to avoid letting short-term market moves and flashy headlines influence your investment decisions. If you have any questions about whether your current financial plan is still right for you, please feel free to reach out to us. We are always here to help guide you through turbulent times.
[1] http://www.cnbc.com/id/45435459
[2] http://seekingalpha.com/article/310966-a-triple-whammy-of-good-news
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
