, July 13, 2010 10:35 am
Like many others out there, you probably got your second quarter investment statements in the last week. You had to sit down. Thoughts of March 2, 2009 rushed through your mind when the Dow Jones Industrial Average ended the day at 6,763.29. Are we headed for a double-dip recession like the newspapers and commentators are saying? But what about the Dow’s comeback…when it topped off at 11,005.97 on April 4, 2010? Maybe those columnists and commentators don’t have a clue what’s going to happen. All we really know is what’s happened in the past and how markets have responded to economic conditions at the time. There have been comparisons to a long recession that started in 1937, but our economy is so much larger and different than it was 73 years ago.
It’s obvious to me the federal government’s stimulus programs have helped start the engine on the post-recession recovery. There’s still a huge chunk of that money to be spent, although politics now seems to be directing this bus since we’re coming up on mid-term elections in four months. High deficits and unemployment have given conservatives their platform. Others worry that slashing spending now will choke any hopes of a recovery (which might help some politically). Housing has slowed, orders for durable goods and automobiles are down and retail sales have dropped. Things are better than a year ago, however. Everyone’s keeping an eye on the Asian and European economies. Some American manufacturers are pulling out of China, because Chinese workers are starting to demand higher wages. That may increase our employment numbers if companies bring those jobs back home. In the meantime, many U.S. corporations will be reporting their earnings this week which should provide some good news. It’s all a huge puzzle and we’re just going to have to wait to see how things shake out.
So, what can investors do as the volatility continues? Keep doing what you’ve been doing all along: save regularly,reduce spending and don’t panic. When the markets swoon, lower share prices are your friend. It’s like shopping at a consignment store: quality at a low price. And if you noticed that the Dow was up 512 points between July 6-9, then you may have already forgotten about your second quarter statement. Keep the faith. Until next time, here’s to good planning!