As we discuss the market volatility, enjoy this link to a roller coaster ride simulating the experience of “riding the market roller coaster”; it’s amazing that people will pay good money to be scared out of their wits on a thriller-ride roller coaster when all they need to do is turn on CNBC Market Watch. Click here.
There are some positive signs for the domestic and global economy, which are helping us climb to those dizzying heights on the roller coaster. The ADP National Employment Report stated that the US private sector added 110,000 jobs in October, which were 9,000 greater than predicted. In China, whose $6 trillion economy has a major impact on world financial events, Vice Finance Minister Li Yong stated that the economy is on track and the government will take a flexible approach in maintaining growth. Inflation in China is slowing, which creates room for more loose fiscal and monetary policies (i.e. an opportunity for imports to increase).
On the European front, German Chancellor Angela Merkel and French President Nicolas Sarkozy are meeting with Greek Prime Minister George Papandreou in an attempt to accelerate the resolution of the Greek debt situation. The expectation is that European leaders will be in a position to lay out a clear plan to resolve the bloc’s debt crisis.
Generally positive signs such as this are offset by continued uncertainty in Europe and Washington, and every time negative news comes out, we have another dip that causes stomachs to churn. We can expect this ride in the market to continue, and slow rather than robust growth in the economy, until these issues are resolved. Dizzying rises and dips have occurred before, and are typical of a bear market. A sure sign that we are out of the bear market will be when the roller coaster ride subsides, and we can again resume a life that generates less adrenaline.
In the longer term picture, if the past is any indication, just like all roller coaster rides, the markets will take us through some smooth periods, and then suddenly give us a good scare all over again. This is the perverse nature of the investment markets; they scare the heck out of investors, as if they’re trying to convince you to jump off the ride, and then they provide an unexpected period of nice returns to those few who were brave enough to stay on the ride. At this point, we continue to advise staying the course in the investment markets, with the possible exception of strategic losses to offset gains for tax purposes.
The opportunity during this period is: how do I allow myself to actually enjoy the ride, like the person on the roller coaster video swinging his legs forward and backwards with anticipation and excitement? As you know, at Colman Knight, our view is all about the bigger picture, which expands well beyond your investments; and considering all of life’s wealth is what the ride is really all about.
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