|Whatever happened to the lazy days of summer?
Had the government listened to the warnings from the S&P, that the US must reduce the deficit by $4 trillion or they would lose their AAA rating, the financial markets may not have reacted in such a volatile manner.
While this is all very painful, I think what sets America apart from other countries in crisis now, is that we are a nation built on entrepreneurship, and have shown historically that we know how to rally when times get tough. At the end of the day, our debt is not junk and still one of the best debts worldwide.
The Fed has done their job and provided liquidity by stepping in and leaving interest rates at near zero levels until mid 2013.
It is now up to fiscal policy to put in place pro-growth strategies to stimulate employment and reduce deficits.
As I have been saying for a long time, corporate America is in great shape and still has lots of possibility over the next 5-7 years. On the other hand, people should not put any money at risk that they will need for the next 1-3 years. The markets will continue to be volatile for the next year or so, which, conversely, means some great opportunities for investors. Many high quality dividend-paying stocks (and even the S&P 500) are paying yields above the 10-year treasury, which is currently yielding 2.34%.
The market trades at certain valuation levels – currently we are so oversold and at valuations that were in place at the financial crisis lows. CAIM has been buying stock on this weakness because we believe this is a great opportunity to own quality companies at lower prices.
Some positive things to note:
1. Insiders and corporations are buying stock. They realize there is value in their companies at these low levels.
2. 20 of our companies have already announced dividend increases this year with an average increase of 10.5%.
3. Over the past 3 months, oil has dropped 15.6% to $82.89 a barrel (close on 8/10/11).
As always, please feel free to call with any questions.
Catherine Maniscalco Avery
CAIM specializes in creating and managing
customized and fully diversified investment
portfolios for private investors.