October 29, 2008
October 29, 2008
As we move closer to the elections and arguably the most important decision our country has to make in nearly a decade, I thought it appropriate to update you on our thoughts and strategies going forward.
In the short term we are expecting a bounce up in the markets after the election. While we can never be certain who the winner is until after the elections are over, we do know that there will be a new president and a new administration. The resulting changes and good feelings that accompany that transition should bode well for the markets in the short term.
From a historical perspective this article, while dated does provide some interesting food for thought. We expect the bounce could take us up close to 10,000 on the Dow but we expect it to be rather short lived. Based on history and the current conditions we view that bounce as a selling opportunity to reduce our exposure to the international markets and to add to our hedged position.
From an international prospective we are seeing a decoupling between diversification and overseas investment. In good times investors would include international investments in their portfolio as a way of diversification and hopefully protection during downturns. Investors however still look to the US as a safe harbor for their investments when economic difficulties occur. The world’s economies have become so intertwined that when trouble arises, virtually every economy eventually feels the pinch. Foreign economies are now feeling the effects of what the US has been dealing with for nearly 12 months. The US economy was the first to enter into recession and likely will be the first to emerge. To that end we believe there is more downside to the international markets and we need to lighten up our allocations in that asset class.
To reiterate long term I am still in the 70/30 bullish camp over the long term. To further clarify, I think we will see a retest of our lows after the post election rally. At that time I expect the market volatility to settle down and we should expect to see the 50 day and 100 day moving averages aligning themselves with the shorter term average moving above the lower. That may take another 6-12 months to form, but as we have in the past we will emerge from this difficult market and return to positive direction. In order for that move to the upside to occur we need two things to happen. First we need to see the markets stop going down. We will be looking at the moving averages as our indicator. Then we need to see leadership out of one or two of the 10 sectors in the economy. We are tracking those sectors to identify that leader as soon as we can. Historically, technology has been the first sector out of the blocks but we will be following all of them closely.
Enjoy the last few days of fall before the rains begin and keep your life in balance!
Mark G. Neil, ChFC, CLU
Northwest Wealth Advisors, Inc.
Office: (503) 478-6632
Fax: (503) 296-5635
0605 SW Taylors Ferry Road
Portland, OR 97219
P.O. Box 82718
Portland, OR 97282-0718