Thursday, 3 March 2011
So let’s talk about investing in a market environment that has many angles pending over it like; rising commodities, the slowing economy, worries about the fiscal direction of this country and tension rising in the Middle East.
Something we have to realize is that we are having a classic cyclical recovery, but it’s a point in time where profit margins are going to be stressed out. Commodity costs from energies are on the rise, and the capped spending activities by the consumers will keep a lid on overall economic growth, so therefore as the Market moves throughout the year we are probably seeing a narrowing performance period, and I think as an investor you should have a defensively base portfolio, with a good combination of health care and technologies.
Tensions over the Middle East add to worries that most people have about the rise of interest rates. Treasury’s are artificially loaded due to government stimulus. We are probably looking at higher rates in the near future. As an investor you have to prepare for higher interest rates and inflation that could be driven by those higher commodity prices. This should be expected within the time frame of the next 12 to 18 months depending on how strong the recovery is.
We have an interesting phenomenon going on now with corporations starting to do relatively well and Government doing poorly, creating a disparity.
Us states and local deficit problems, including restructuring will probably be as unstable as Greece and Ireland were the last year. However, corporate balance sheet will power trough and lead the greater investment spending helping some level of employment growth, which should be reflected this week with the ADP and payrolls number.
So the bottom line you shouldn’t be investing in cyclical, and more in sustainable growth companies.
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