It is abundantly clear that for now investors are ignoring what is happening in Washington, D.C
The equity markets have shaken off any concern about the sequester and financial struggles in Europe by continuing to show momentum that has taken the Dow Jones Industrial Average above its all-time highest closing level. (Bloomberg) The Great Recession’s 54% decline was officially erased in 5.4 years (Ned Davis Research)
Lowe Wealth Advisors moved prior to the sequestration process to harvest a portion of the year-to-date equity gains in some of our more conservative allocations. We believe it was prudent to protect some gains prior to the sequester. If we continue to see solid economic data, it is plausible that the equity markets could continue to rise. At the same time, it will be important to monitor investor complacency and to recognize that any short-term event could cause the equity markets to pull back. Among the areas we are monitoring:
The potential impact of the sequester, which is still likely to dampen economic growth. This is an area to watch even though investors at this time seem content to focus on economic data that appears to show resiliency in spite of all of the political uncertainty.
Europe, which may remain a contributing factor to market volatility, especially if “anti-austerity” politicians are elected.
Inflationary pressures and a change in the policy of the Federal Reserve, which may be a longer-term threat to the equity market momentum. We believe that such a scenario could cause turmoil in both the bond and equity markets, and that this represents a greater long-term risk than that of another recession.
One final factor that could boost the momentum of the equity markets in the near-term relates to a proposal that may be circulating in Congress to reduce entitlement spending. If this becomes a reality, we believe the equity markets could respond with renewed optimism and potential strength.
Only time will tell; and Lowe Wealth Advisors will monitor events and adjust our actively managed strategies accordingly. We do plan to redeploy some of the profits we harvested prior to the sequester. While prices may be higher than when we sold, locking in gains was an important tactical strategy. In addition, we are considering adjusting our gold and emerging market bond holdings in the near-term.
Lowe Wealth Advisors is an SEC registered investment adviser with its principal place of business in the State of Maryland. Lowe Wealth Advisors and its representatives are in compliance with the current notice filing and registration requirements imposed upon registered investment advisers by those states in which Lowe Wealth Advisors maintain clients. Lowe Wealth Advisors may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. For information pertaining to the registration status of Lowe Wealth Advisors, please contact Lowe Wealth Advisors, or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).
This commentary is intended for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this report will come to pass. While any general market information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. Any opinions expressed are current only as of the time made and are subject to change without notice.
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*Lowe Wealth Advisors is a registered investment advisor.