This blog is Part 5 of our Personal Finance Series that will stretch over several weeks. It was prompted by the Personal Finance Seminar I am moderating for Rockville Bank on Dec. 15 in Glastonbury. The event is free, but seating is limited. For reservations, call 860-291-3654.Before taking any of my advice please check with you financial advisor. I am not certified as any kind of financial planner and my advice is solely based on my personal experiences investing over the past 40 years and from being the Business Editor of The Courant for 12 years. And keep in mind. No matter what anyone says there is risk to any financial decision you make or don’t make.
Today’s unexpectedly positive (relatively) job report has Wall Street celebrating with new yearly records being created in several indicies.
But be careful. The higher we get, the more dangerous it is going to be based on everything I have learned in the past 40 years.
A lot of the drive up in the markets is caused by the cheap dollar, a flood of money with nowhere else to do, and record low interest rates.
At the first sign of the federal reserve taking cash out of the economy, a global event that drives oil prices much higher, another sovereign fund defaulting, are just a few of possibilities that could deflate the market and deflate it quickly.
Unfortunately, emotionally we feel more comfortable investing when the markets are going north and we want to sell when markets are going down.
Just remember how many people fled the market when the S&P 500 slid to 666 in March. Many will consider jumping back in today as the S&P is over 1,110.
I am not suggesting you sell now, but I am suggesting that its dangerous to buy and you might want to consider taking some profits off the table if the market keeps moving up toward the end of the year as mutual fund managers – who missed the ride up – now start pumping their extra billions into stocks.
And as fas as long-term bonds are concerned – forget about it. The odds are that interest rates are going to be going up in the next year and that will be terrible for the bond markets.
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