Stock Market Headwinds

The U.S. and global economies face unprecedented economic and geopolitical problems.

On the optimistic side, the U.S. economy and financial markets have faced numerous major problems over the years and have always recovered and continued to grow and prosper.  The U.S. economy is incredibly resilient because of the dynamics of our educated citizens, their work ethic, free enterprise, and can-do spirit of our culture.  I have no doubt that the U.S. will also work through these difficult issues listed below. 

From an investor’s point-of-view, it may be very difficult for the financial markets to begin a new sustainable secular bull market in light of the following economic issues I discuss.  However, as you have seen in the Dow Jones Historical Trends chart, this does not preclude strong market advances from occurring, which can last many months, or even years. 

My outlook here is not a short-term forecast, but a discussion of economic issues that could create headwinds for the stock market and perpetuate a long-term sideways market.  Also, these are not Republican or Democratic issues, but non-partisan issues confronting all citizens and investors regardless of political philosophy.

I encourage you to read the analysis of these key issues confronting our economy, the financial markets, and your future by clicking on the link below. 

I believe that the more informed you are, the better and more confident financial decisions you can make.

Stock Market Headwinds

In Summary

Many of the issues and trends discussed in the analysis of Stock Market Headwinds are deeply concerning.  There appears to be no clear, easy, or quick answers.  How these issues will play out over the next 10-30 years is completely uncertain. 

I believe that these issues, and their attendant risks, will confront the Baby Boomer generation throughout their entire retirement. 

I believe that we have entered a period of time of unknown duration; one that will be characterized by increasing economic, financial and political uncertainty, and this will have a profound affect on the financial markets for the foreseeable future. 

Furthermore, I believe that the common financial disclosure that “Past performance is not a guarantee of future results”, means just that.  We can look to the past for guidance as to how financial markets behaved under certain circumstances, but considering the uniqueness and gravity of the issues discussed above, we cannot bet our entire financial future that market behavior will be similar going forward. 

We have to spread our financial bets among different investments and different investment strategies to increase our chances of a successful outcome.  I believe it is foolish not to take these issues into consideration when planning for retirement. 

I also believe that a good “defense” will be as important, if not more important, than a good “offense” in assuring and enjoying a successful retirement.

I welcome your comments and inquires.

“Helping you Build, Protect and Sustain the Lifestyle you Want”

The opinions expressed in this material are for general information purposes only and are not intended to provide specific advice or recommendations for an individual.

Copyright © 2010 Jeffrey M. Stark, CFP®

What Factors Could Perpetuate the Current Secular Bear Market?

The U.S. and global economies face unprecedented economic and geopolitical problems.

On the optimistic side, the U.S. economy and financial markets have faced numerous major problems over the years and have always recovered and continued to grow and prosper.  The U.S. economy is incredibly resilient because of the dynamics of our educated citizens, their work ethic, free enterprise, and can-do spirit of our culture.  I have no doubt that the U.S. will also work through these difficult issues listed below. 

My only concerns are how the country will change in the process and how investors will fair in the meantime.

From an investor’s point-of-view, it may be very difficult for the financial markets to begin a new sustainable secular bull market in light of the following issues.  However, as you have seen, this does not preclude strong market advances from occurring, which can last many months, or even years. 

My outlook here is not a short-term or even an intermediate-term forecast, but a listing of issues that could create headwinds for the stock market and perpetuate a long-term sideways market.  Also, these are not Republican or Democratic issues, but non-partisan issues confronting all citizens and investors regardless of political philosophy.

I have divided my analysis into two groups: Economic and Geopolitical issues. 

Among Economic Issues, I discuss the trend, magnitude and interrelationship among the Federal Budget Deficit, the National Debt, the Trade Deficit, a Potential Dollar Crisis, the ominous Government Debt Bubble, the dangerous Dependence on Foreign Lending, Consumer Retrenchment, Deflation vs. Inflation, and Globalization.

Among Geopolitical Issues, I discuss concerns about Islamic Extremism, the Spread of Nuclear Technology, Iran, North Korea, Pakistan, Iraq, Mexico, and Illegal Immigration.

I encourage you to read the in-depth analysis of these key issues confronting our economy, financial markets, and your future by clicking on the link below. 

I believe that the more informed you are, the better and more confident financial decisions you can make.

Economic and Geopolitical Issues

In Summary

Many of the concerns and trends discussed in the analysis of Economic and Geopolitical Issues have no historical precedent and others have very deep historical roots.  In any case, there appears to be no clear, easy, or quick answers.  How these issues will play out over the next 10-30 years is completely uncertain. 

However, I believe that these issues, and their attendant risks, will confront the baby boomer generation throughout their entire retirement. 

Economically, I believe that the U.S. cannot continue to borrow and spend its way into economic prosperity.  Geopolitically, I believe the resolution or lack of resolution of these issues will have a profound effect on world history. 

As a result, I believe that we have entered a period of time of unknown duration; one that will be characterized by increasing economic, financial and political uncertainty, and this will have a profound affect on the financial markets for the foreseeable future. 

Furthermore, I believe that the common financial disclosure that “Past performance is not a guarantee of future results”, means just that.  We can look to the past for guidance as to how financial markets behaved under certain circumstances, but considering the uniqueness and gravity of the issues discussed above, we cannot bet our entire financial future that market behavior will be similar going forward. 

We have to spread our financial bets among different investments and different investment strategies to increase our chances of a successful outcome.  I believe it is foolish not to take these issues into consideration when planning for retirement. 

I also believe that a good “defense” will be as important, if not more important, than a good “offense” in assuring and enjoying a successful retirement.

The opinions expressed in this commentary are mine alone and do not represent the views or opinions of LPL Financial.

 Copyright © 2009 Jeffrey M. Stark, CFP®

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