Broker Check

Why I’m Not Panicking

August 2011

Understanding that today’s market could cause uneasiness, I wanted to send a quick email with some key points to remember:

  • Friday’s downgrading by S&P was not unexpected. The primary reason they cited was the inability for Congress to agree upon a plan that started to immediately and significantly cut government spending. The rating agencies were looking for at least $4 Trillion in spending cuts. The deal reached fell short of this amount AND the cuts were neither immediate nor guaranteed to be implemented.
  • Today’s stock market decline also was not unexpected based on the downgrading.
  • The stock market reflects the expected future value of companies. Many companies are in a much stronger financial position today compared to 2007; thus future profits are expected to be strong. This will have a positive impact on the stock market. At the same time….
  • There are issues with other economic factors, such as unemployment, and our Nation’s debt situation that will have a negative impact on economic growth and, potentially, the stock market.

To summarize, while I anticipate volatility in the market to continue until a clearer plan to fix our Nation’s debt situation and to promote long-term economic growth is implemented, I believe businesses are in a stronger financial position. This should help to reduce long-term declines in the market.

I continue to encourage investment decisions to be based on a person’s goals and sound fundamentals instead of reacting to fear. Please call me if you would like to review your goals and if any changes to your situation might call for a change in your investment strategy.

Thank you.