I have always been a “glass half full” person. I truly believe that life’s journey is made up of all things, including challenges, joys, tears and laughter. Do not misunderstand; I do not wander around wearing rose colored glasses thinking all is good. No, life is tough and it throws you curve balls and you may even get hit by a pitch occasionally, but if you continue to step up to the plate, you never know, that perfect pitch may be the next one coming your way.
Just think about the last year in the market. It sure may feel like a curveball or even close to being hit by a pitch, but I do believe that there are good pitches coming our way.
That brings me to three economic and investment situations we are facing right now into early 2012 that could determine your next investment move.
If you listen to our weekly webcast, or follow us on Facebook or Twitter you know that we’ve been saying that “Europe is Key.” Gib says it is the tail wagging the dog; he is right. We have also been focused on corporate earnings. They need to be overall up. Finally, we have said Santa needs to bring Christmas spending confidence to folks.
As I write this blog, I cannot stress the weight that Europe is carrying on market direction. Let’s be clear: if the EU fails or throws a wild pitch into the stands then a team meeting should be considered.
But what does seem to be developing is the firming up of the economic factors which could create an opportunity for the large cap stock indexes we all follow. There could be an opportunity for these to be up by the end of this year. If I am correct and no unforeseen big event comes crashing in to derail the market, then I believe it is time to re-evaluate your current thinking.
First, consider your risk tolerance. Ask yourself if you would be willing to move 5% – 10% more into large cap dividend equities. Second, evaluate your current cash and bond positions. Consider putting assets to work. If cash is earning nothing and intermediate corporate bonds are yielding close to the same earning rate as high quality blue chip stocks, then the move would then be to consider adding large cap dividend equities. A move like this is not appropriate for all as it would increase risk, but if you are willing to take on the risk there may be an opportunity. Third, if you are going to consider this, stay focused on high quality large cap dividend paying stocks. We are not quite to the 7th inning stretch, and quality and dividends need to be in our bullpen.
Again, this must be carefully weighted, but at this point in approaching year end and early 2012 this just could be pitch we are looking for.
Stock investing involves risk including loss of principal.