Put me in the mediocre camp … but hey that’s not bad! The summer months have been marked by renewed talk of a recession. We have seen a pull back in the equity markets and some disappointing job reports. The housing market has continued to struggle as well. The European debt crisis refuses to go away. For the last year or so it pops up, causes worry and then fades from the headlines only to pop up again. I am sure we have not heard the last of it. This string of disappointing news has prompted many economists to revise their economic forecasts downward. This comes on the heels of some very positive forecasts at the beginning of the year. In just a few short months the consensus view on the economy has gone from overly optimistic to overly pessimistic.
I believe that things are neither real bad nor very good right now. Our economy is most likely going to muddle through and continue to expand, but at a very slow rate. This expansion will continue to be propelled by exports, moderate consumer spending and some corporate spending. Continued high unemployment, a flat to down housing market and state and local government spending cuts will provide plenty of headwinds keeping our potential economic growth in check. While this is not the robust recovery everyone is looking for it is certainly better than another recession.
From an investment perspective, this environment may still provide positive returns. Maintain good balance in your portfolio and be sure to continue to invest a large portion overseas in both the stocks and bonds. One of the most effective ways to gain global exposure is to invest in US multinational corporations that have high international sales. As was the case in previous earnings seasons, the first quarter of 2011 results showed that US companies with a high percentage of international revenue posted more positive surprises than their more domestically oriented counterparts.1
Stay the course and stay invested. A properly allocated, globally diversified portfolio should provide good results over time. The returns may very well end up being mediocre during some periods of time, but mediocre still beats the pants off cash or CDs paying next to nothing right now.
1. Market Pulse, Goldman Sachs Asset Management, June 2011
Damien helps individuals invest and manage risk. He is a Certified Financial Planner™ professional and a principal of Walnut Creek Wealth Management. These are the views of Damien Couture, CFP® and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Your comments are welcome. Damien can be reached at 925-280-1800 x101 or Damien@WalnutCreekWealth.com.
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