Weekly Stock Recap

Light Trading But Positive Week

Last week the S&P index ended 3.6% higher in light trading due to the holiday shortened week. The Year To date return for the broad market is now in positive territory at 1.8% after what was a pretty slow week in terms of news and corporate developments. One important news item was the consumer confidence reading which came in much better than expected. Those readings helped the market off to a good start for the week. But perspective and caution is important here relative to consumer confidence. We like the up tick in consumer confidence readings and the fact that results were better than expected, but readings remain at very low levels. We will breathe a sigh of relief once these readings show a sustained uptrend. On a different note, Long term bond yields fluctuated significantly last week which caused a market stumble when yields rose. Initial jobless claims slowed again last week which suggests the pace of layoffs is indeed slowing. However, continuing claims continue to grow which indicates that the economy is still not generating enough jobs to compensate for even a slowing pace of job loss. That is a trend we do not expect to see reversed any time soon. General Motors was the big corporate news as the company continues to teeter on bankruptcy. The market speculation is that the company will enter bankruptcy as early as next week.

Market Beating Foresight

Our optimism continues to grow as the market builds on recent gains. A 3.6% increase for the week is modest, but represents the kind of growth that is more sustainable over the long term. Volatility levels continue to moderate and that is a positive barometer that will help bringing investors back to the market. The economy remains very weak and we do not see a major reversal anytime soon. However we do think now is an excellent time for investors to increase stock allocations. Over the past few weeks, we have gone from a 70% cash position to begin nearly fully invested. We have been very aggressive increasing our stock allocations. We do think that the worst is over for the stock market, but caution that the market could still suffer significant bumps. Given a longer term view, this should be an excellent time for investors to enter the market. However, investors can reduce the risk of market timing on entry by spreading their new stock investments over a few months. The other important factor is to maintain portfolio diversification by investing in 10 stocks across a variety of industries. The stock market has already made a strong move since the March 9th lows. But we think the odds are good that the market will continue its uptrend amidst what will surely be bumps along the way. Last week was a short week with the holiday and trading volumes and net inflows were relatively light. But we expect the inflows into the market to grow significantly over the remainder of this year and that will likely support a rising market. Investors will not want to miss out on this potential rally. Obviously there is no guarantee, but we think the market upside potential outweighs the risk. We are 90% invested in our stock portfolios and plan to be fully invested very shortly. Our plan will be to stay fully invested over the near term as long as the market avoids another meltdown.