While we admit breathing a small sigh of relief this week after our elected officials agreed last week to reopen the government, raise its borrowing limit, and pay its bills, we must also confess a feeling of general concern for the long term fiscal health of the nation. We don’t expect the country to balance its books in the same manner a business or household might, but we do expect it to operate responsibly and within its means. And, just perhaps, we’d like to see our leaders guide the nation’s financial course with a multi-generational attitude in mind rather than by a series of last minute, skin-of-the-teeth, short-term fixes garishly imbued with political posturing.
All that being said, and even in light of some evident dysfunction from our elected officials in DC, we’re actually optimistic as investors. There will be, of course, volatility in the markets between now and the end of the year, but that doesn’t give us rise for concern. There always will be volatility, of course, and as we mentioned last week, we like to view downdrafts as buying opportunities. With respect to the Fed and its various “tapering” options, everyone knows that it’s going to happen; the markets have had plenty of time to budget in a cessation of the infusion of government cash. Rather, the most important things that we will be looking to in the near term are the earnings reports from large firms with the hope of seeing growth. The bottom line is that we remain bullish on the stock market for the remainder of 2013 and going into 2014.
Events like last week test an investor’s convictions, discipline, and fortitude. In an effort to stay informed, it can be tempting to react emotionally and perhaps do something contrary to one’s plan and goals. Hence, we find it helpful to keep in mind a few things: 1) a well constructed, long term portfolio and strategy is, after all, a well constructed portfolio and strategy, and is usually capable of absorbing the occasional jolts of the markets, 2) the individual jolts in the market are what make the markets as a whole work, 3) most of the news media is a for-profit industry, with a mandate to sell subscribers and advertisers, and the truth is that fear apparently sells pretty well. So it’s probably best to keep things in perspective, do your due diligence, and follow your plan faithfully. More often than not, the stuff in the headlines seems to take care of itself anyway.
– Chad Campbell