It's about time to re-evalutate your investment goals
As we move halfway through earnings season, we have seen a strong rise in the stock market as major indices make new highs. As of Nov. 10, the Standard and Poor’s (S&P 500) is trading at 1,770 and the Dow Jones Industrial Average is at 15,761. The 10-year treasury is at 2.74 percent and the 30-year treasury is at 3.84 percent.
With the government shutdown still affecting the tardiness of economic data, we are slowly getting a better picture of September. Economic news has been similar to prior months. The consumer confidence index fell to 71.20 which fell below economists’ expectation of 75. In the last six months, we have seen economic data start to pick up with a result of a slow but improving economy.
During the week of Nov. 4, we had a few important economic indicators. On Thursday, we had third-quarter GDP data. Economists expected 2.0 percent but actual data came in at 2.8 percent. On Friday, we had reports on non-farm payrolls beating expectations and increasing to 204,000 no jobs in October. Both economic indicators showed the government shutdown did not have a lasting effect on the economy in October.
Since we are in earnings season, 446 companies have reported earnings for the third quarter. Seventy-three percent have reported earnings above the estimates and 52 percent have reported sales above estimates, according to FACTSET.
I believe stocks may enter a period of consolidation over the remainder of this year in anticipation of the Federal Reserve tapering its quantitative easing measures, the impact of government shutdown and the renewed debt debate in Washington. Longer term I remain positive on the outlook for the United States economy. I believe periods of weakness should be used as an opportunity to increase exposure to the stock market. I believe bonds are likely to hover around their current levels until we see a move made by the Federal Reserve.
In the fixed income space, investors should try to limit the length of bonds in their portfolios. I believe investors should stay at 4.75 years for taxable and seven years for tax-exempt bonds in their portfolios. During times when the market is hitting all-time highs, it is very important for investors to rebalance their portfolios. Rebalancing is the process of refocusing your portfolio with your appropriate asset allocation. Rebalancing allows investors to take profits and reallocate money where experts see fit. As we head into the end of the year, it is important for investors to reevaluate their investment goals.
Brian Trymbiski, a financial advisor in Doylestown, helps manage investment portfolios. He can be reached at home.wellsfargoadvisors.com/Brian.Trymbiski or 215-340-6378.
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