Monday, April 11, 2011

The Future of the Stock Market


As Dividend Partisans (those who show strong allegiance to a particular cause - in this case, Dividends), we should always be searching for two things: value, and quality dividend growing companies.

Oftentimes however, it is these particular companies we're searching for that make up the majority of the S&P500.  As a result, how the market performs as a whole will potentially be indicative to how our personal portfolio's perform as well.  Consequently, we shouldn't be too concerned with the day-to-day market swings; rather with where the overall market is headed in the longer term.

The rest of this article will discuss some thoughts about where the market is headed (Bull vs. Bear style).

In addition, however, it is intended to hear your thoughts on where the market is headed.  Are you bullish or bearish? Have you read anything lately to make you feel one way or another? What are your thoughts? I know many of you understand the market much better than me!

As illustrated in The Thinker above, let's put our brains together and come to some accurate market conclusions.

The Thinker, by Auguste Rodin, depicts a man in "sober meditation battling with a powerful internal struggle."  Though I personally believe we shouldn't struggle to those levels of mental anguish in deciphering the direction of the market, we should give it attention as serious investors.

So here is the question: Bull or Bear?



My Thoughts
Listed below is a 'one statement summary' of my thoughts on the direction of the market, along with some telling facts I found.  Here it goes:

   There are still some value plays left out there; but the majority of "good buys" are few and far between now and will remain that way for the remainder of the year, with the market making only modest gains (around 4-5%) overall.

FACT 1: The S&P's 500 Index is now up nearly 100% since the March 2009 market low (one of the fastest market doublings in history)

FACT 2: The median bull market lasts about 3.5 years.  The current rally is now in year 3.

FACT 3: The average gain in year 3 of a bull market for the S&P500 is 5%.

Since none of us can tell the future, a lot of what we may think is unfortunately speculation; however, I have tried to 'put my card on the table,' and I am interested in hearing yours.  Looking at the facts above, I'd say I'm more bearish than bullish at this point.

We're all in this together trying to figure out the best places to invest.  What are your thoughts on the market?

Looking forward to some good discussion,

DivPartisan

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8 comments:

  1. I agree. We won't see to much movement in the market this year. And while the great deals of the past 3 years are long gone, I still think there are a few positions worth adding to, or ones that only need a small dip.

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  2. I am bearish as well. I usually dollar-cost-average monthly, but I may sit out April and see what lies ahead. What will be particularly telling is 1Q results and outlooks from these companies. At any rate, the market is a little expensive for my tastes and I'd like to see a 5% pullback or more, but like The Dividend Pig stated there are a few positions out there that only need minor dips to make them "buys".

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  3. Consider looking at some of the health/pharma stocks.

    Things like Merck and JNJ - over 3% under their 200 DMA and 9 - 10% below their 52 wk highs.

    JNJ is a 3.6% yield right now and is also, if they follow their trend for many many years, about to raise their dividend. JNJ's last hike was over 10% so even if you bought now and they didn't move up you would be buying a 4% yield, which if you are after rising streams of income I'd keep it working.

    I would, however, consider splitting new monies into a pool of 40% cash and cash like investments (floating rate notes, etc) and the rest invested into the investments to reach the goals. Then, when the market does relax some, or pull back if you will, you will have some cash reserves built up for shopping while also keeping some new monies working the dividends. I mean truly, a pull back could be tomorrow, 6 months from now, 3 years from now or maybe we just pause and hold steady. A proper and expected pull back may not happen as you think it should look like, but after its too late you might kick yourself. There are always bargins, even at bull market tops (look for weak sectors).

    mshideler

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  4. Personally, I love JNJ and ABT right now. GREAT prices :)

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  5. Simply excellent post! Good one on future of stock market.

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  6. This comment has been removed by a blog administrator.

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