Where is the Market Headed?

Where is the market headed?

The stock market ups and downs in 2011 are looking much like 2010 so far. We have had a good up market for most of the year and now have had six consecutive weeks of down market. A similar thing happened last year and 2010 ended on a positive note with the S&P 500 being up over 15%.

If you have followed my earlier articles you know that I do a lot of reading in an attempt to get a feel for the market. I have recently read several articles indicating that 2011 will likely look much like 2010 with a strong beginning, a lull in mid year, and finish the year with positive earnings. In fact, some are even predicting 2011 ending with the S&P 500 being up 10% to 12%. On the other hand, some are seeing weakness in employment and high oil and commodity prices as indicators of a weakening stock market.

My consensus from all my reading is that we are likely to experience a down market early this summer, similar to what happened in 2010. High oil and commodity prices are slowing economic activity thus bringing stock prices down. However, a slowing of economic activity will result in lower oil and commodity prices and that will result in increased economic activity, particularly in the emerging markets. I believe the emerging markets will be the first to show improved activity and profits, followed by developed international markets, and lastly by the US economy. For this reason, I believe it is important to have a reasonable portion of the portfolio allocated to international securities.

On the fixed income side, we also have concerns. The US debt continues to climb and congress seems reluctant to cut spending or raise taxes to stop the debt from continuing to grow. Three credit rating agencies have cautioned that they will be forced to lower their rating of US debt if this is not corrected. Several large investment houses have already made a substantial reduction of US Treasuries in their holdings. Global bonds (except for Europe) seem to be much more stable and able to produce reasonable returns than are US Treasuries at this time. I believe this is the time to hold foreign fixed income securities in place of US government debt.

Need Help?

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

Happy Investing!

Royce

Royce L. Ruckman, CPA, AEP

Director of Investment Services

United Methodist Foundation of Indiana, Inc.

8401 Fishers Center Drive, Fishers, IN 468038

toll free 877-391-8811, cell 765-661-6804

e mail  rruckman@niumf.org

Visit our web site at http://www.UMFIndiana.org