Bumps in the Road

Investors have been experiencing ‘bumps in the road” since early 2010. There have had some really good days, weeks and months and some really difficult days, weeks and months. Investors can’t change this situation, but do need to put the situation in perspective. What can we expect in the future?

No one can accurately predict what will happen in the near term. However, it is clear the stock market out performs other investment assets over long periods of time. Very few investors actually invest in stocks for short periods of time, so why all the worry about what is going to happen in the next few weeks? Two emotions drive most investment decisions; fear and greed. Both fear and greed can keep an investor from investing in stocks when the market is volatile.  Investors fear they will make a mistake by getting in before a market decline and greed causes the investor to attempt to buy at a perceived market bottom. It is easy to identify when the best buying opportunity existed by looking back yet it is impossible to identify those same opportunities by looking at the present or the future.

Since history has proven that stocks outperform other investment assets over long periods, and we know it is impossible to look forward and pick the best time to buy into the market, wouldn’t it be better to invest now so we are in a position to participate in the market rather than sitting on the sidelines wondering when we should get in?

I just finished an article which attempts to provide input on what may be anticipated in the next few months. Following are a few of the highlights:

• Recent dramatic comeback in corporate earnings has put stocks at an attractive value relative to fixed income securities.
• Second quarter slowdown in growth is typical of this point  in the economic cycle.
• Corporate earnings improvement (S&P 500 up 50%year over year in second quarter) are a result of increased productivity from a smaller workforce. As the economy continues to grow, companies will add workers thereby reducing unemployment.
• According to the author, “the after tax yield of the S&P 500 vs. 10 year U.S. Treasury bond, the market is the cheapest it has been since 1979.”
• The Monster Employment Index of online job listings shows listing up 21% year-over-year.

If your church would like assistance in developing an investment strategy, reviewing their current investments, or exploring other investment options, we would be happy consult with your decision makers to assist. Our Foundation provides this service free of charge to United Methodist churches throughout Indiana. Just call me or send me an e mail.

Royce

Royce L. Ruckman, CPA, AEP
Director of Investment Services
North Indiana United Methodist Foundation, Inc.
1001 N. Western Ave., Suite D, Marion, IN 46952
toll free 866-669-2327,  local 765-664-2327,
cell 765-661-6804
e mail rruckman@niumf.org
Visit our web site at http://www.niumf.org