By Clyde Noel
Stock Report
Look for the market to go sideways the next two weeks. One day, we’ll have economic optimism and the next day, profit jitters. It’s earnings season when corporations report their quarterly profits and revenues.
Look for the earnings picture to finally improve. We are seeing that in several pre-announcements from corporations. The earnings improvement will be the catalyst to bring investors back in the market.
In Louis Rukeyser’s Wall Street, he advises that those investors who are willing to act boldly and steadfastly before all the evidence is in, will continue to be the big winners of the next generation.
Stocks changed slightly last week. The Dow Jones industrial average finished down 0.2 percent for the light four day week. The Nasdaq composite index shed 0.3 percent for the week and the Town Crier index was down 0.6 percent.
With all this sideways movement of the market, investors may want to make some adjustments and prepare for an economy that doesn’t move much.
Interest rates deserve watching. If the Federal Reserve starts to raise interest rates then bond fund and bond buyers will get clobbered. Consider short term bond funds that mature in three years or less.
Consider stocks with two contrasting techniques. If you’re more than 10 years from retirement, a strategy of investing steadily and not selling can serve you well. Check the investors who bought in the 70s, and were richly rewarded in the 90s.
If the market is going to go sideways a couple more years, it’s a good time to accumulate shares Don’t look for an increase overnight, but it can sure help with retirement money.
This is a stock pickers market. Fundamentals are better in small to mid-cap stocks, but harder to find. There are plenty stocks that have an attractive price/earnings ratio. Some old economy stocks look good and cheap.
Set a two year price tag on any selected stock. The average stock can rise 2-3 percent in the coming quarter.
Investors will be watching several reports this week to confirm the economy is getting better. Among them are the March car-sales figures and construction-spending report. On Friday, investors will be eyeing the March employment report as well as data on February’s consumer credit.
Beware of commodities. It’s true that gold prices spiked to $600 in 1982, but that was an anomaly. They have basically coasted in the $300 to $450 range ever since, and are in the low end of that range today. Commodities such as gold do rise during times of upheaval and inflation, but they are cumbersome to buy and sell. If you buy futures you can get burned on fast moving prices; if you buy actual gold you’ll have to pay retail, sell wholesale and worry about storing it.
A better alternative for the inflation-fearful is to buy mutual funds that specialize in commodities companies. You’ll get some, but not all, of the protection with some, but not all, of the risk.
Noel, a seasoned investor, covers the stock market for the Town Crier.
