Saturday , 18 November 2017


Don’t Abandon Stocks In Spite Of Ongoing Volatility – Here’s Why

After the Fed indicated last week that tapering could begin as early as this fall, investing-hold-buy-sellcoupled with concerns about Chinese growth, stocks sharply reversed course and Treasury yields spiked. I expect market volatility to last through the summer as investors remain uncertain about the future of monetary policy and the strength of the global recovery. That said, I wouldn’t advocate abandoning stocks. Here’s 3 reasons why.

So writes Russ Koesterich (http://isharesblog.com/blog) in edited excerpts from his post* entitled Despite More Downside Risk, Stick with Stocks.

[The following article is presented by  Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Koesterich goes on to say in further edited excerpts:

Below are my three reasons why:

1.)    The basic ingredients of the 2013 equity bull market remain in place. Nominal interest rates remain relatively low, inflation is not a threat and corporate balance sheets remain healthy. In addition, stocks are reasonably priced and still look cheap relative to bonds.

2.)    The recent rise in yields is extreme. While I expect that bond prices will continue to come under pressure over the next year, a number of factors keeping a lid on rates still remain in place. In other words, while rates will likely continue to rise, I predict that ultimately the rise will be modest and include some near-term pullback. I expect that the 10-year Treasury will finish the year around 2.5%.

3.)    The U.S. economy can probably withstand a reduction in the pace of Fed asset purchases, assuming a gradual taper that is not so aggressive as to derail the recovery. This could help support stocks.

For these reasons, I expect that equities will ultimately finish the year higher and I still like equities over the long term.

There are areas of the equity market that warrant caution, however. Bond market proxies (such as the utilities sector and REITs) look particularly vulnerable in an environment of rising real rates (It’s important to note that higher real yields, not rising inflation, are driving today’s higher nominal yields as investors are demanding more compensation for holding bonds).

Instead, I prefer select cyclical sectors such as energy and technology….

[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]

*http://isharesblog.com/blog/2013/06/24/despite-more-downside-risk-stick-with-stocks/ (Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist and a regular contributor to the iShares Blog; ©2010-2013 BlackRock. All rights reserved)

Related Articles:

1. Don’t Bail Out of Stocks & Pile Into Cash  – Here’s Why

1 Comment

Ways-to-make-money-1

Don’t give in to your flight instinct in response to the latest stock market volatility. Running for cover in cash right now promises to be the worst possible move. I know, I know. Cash is supposed to be the ultimate safe haven. A riskless investment, if you will but, in truth, cash is the proverbial “Death Star”.  [Let me explain why and show you some irrefutable proof.] Words: 544; Charts: 3 Read More »

2. What Happened to the Markets? Why Did It Happen? What Does it Mean?

Leave a comment

question-mark

How could everything be selling off at once? Aren’t the various different asset classes (stocks, bonds, gold) meant to be hedges against each other? The simple answer is that although it would be great if that were the case, it isn’t — it never was. Read More »

3. “Eiffel Tower” Patterns Suggest Major Corrections in These 3 Asset Classes

Leave a comment

Eiffel tower

Eiffel tower patterns can be very important to your portfolio construction & management because, when you experience the left side of the tower, you often experience the right side as well which often results in declines of as much as 50% from the peak. Currently it would appear that three specific assets could well be forming such patterns. Read More »

4. Almost Every Single Asset Class Is Overvalued! Hardly – Here’s Why

Leave a comment

investing-0

A recent Trim Tabs report claims that almost every single asset class in the world is overvalued yet, while there may be some areas that are frothy, to claim that almost every single asset class in the world is overvalued is a bit of a stretch. This article refutes these claims. Read More »

5. Investors Beware: Armageddon Lies Ahead for Municipal Bond Holders!

Leave a comment

investing-bonds

The Securities and Exchange Commission is worried that municipal bankruptcies, combined with an expected spike in interest rates, means that the muni bond market could face “Armageddon”  with devastating consequences for the individual investors (74% of the total) who hold the paper of which many are retirees. Words: 490 Read More »

6. Here’s the Track Record of Various Financial Pundits – Who’s Best?

1 Comment

Fed-forecast

Recently I discovered a website which tracks pundits in finance (and politics and sports) which does just that. Check it out to see how many of the calls and predictions of your favorite prognosticators have turned out to be true. You’ll be surprised and, no doubt, disappointed! Read More »