On this Labor Day holiday I'd like to offer some observations on what I see as the significant potential to increase the value of your investments.
The stock market has been operating in a range all Summer long. Almost weekly bad news from the debt crisis in Greece to the BP oil spill have driven the market down. Main Street gloom related to high unemployment has significantly reduced customer demand and consumer confidence. That in turn keeps retail investors from investing more and reduces institutional investments as investors withdraw from their mutual funds and retirement accounts to cover monthly bills. More sellers than buyers drives prices down.
Corporate austerity as a result of the Recession has led to some record profits. Companies are flush with cash. But the threat of new taxes and the uncertain costs associated with the new Healthcare legislation has weighed on corporate decisions to restrain expenditures that might otherwise go to expanding production lines and the workforce.
And every poll out there reports Main Street America is not happy with the economy and the Administrations' handling of it.
So what is the good news?
Mid-term elections.
Previous Administration actions have not improved things appreciably and due to growing voter unrest things will have to change if those in Congress hope to be be reelected. I fully expect to see the boot be lifted from the neck of corporate America. The only way to move the economy forward is to allow companies to do what companies do best - - make products and money. If this happens expect production lines to expand and private sector hiring to increase. That would go a long way towards improving consumer confidence and reduce unemployment. Result = Stock market will react in a positive manner.
If despite of new Administration initiatives, the Republicans gain control of Congress, expect Wall Street will react even more positively.
I see the potential for significant upside between now and Christmas. Don't stay on the sidelines.
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