Steve Leuthold, respected market commentator, offers the following observations about avoiding the panic button:
No reason to Panic!
1. The U.S. economy is in a new expansion with corporate earning in a rising dynamic trend with operating earnings on the S&P 500 likely to top the 2008 high.
2. The dollar has now returned to the "favored" global currency. The U.S. stock markets are now more appealing to international investors than European markets.
3. The early May "flash crash" of the stock market and the current volatility will force an almost immediate regulatory response from the SEC to curb High Frequency Stock Trading generated by computers serving large Wall Street institutional investors
Where is the Opportunity?*
1. Roth Conversions - Account values are down from a month ago reducing the potential tax bill on a conversion of Traditional IRA assets to a Roth by 10-20%. Convert some Traditional IRA assets to a Roth.
2. Emerging Markets - Add emerging market mutual funds to your portfolio if you have no exposure to the asset class. These funds were up 60-70% over the last year, but have pulled back 15-25% from their 2010 peak. Check out Emerging Market funds.
3. Increase Your Yield - Libor interest rates are rising. Floating rate bond funds own bonds linked to the Libor. As rates rise, floating rate bonds pay more interest. Additionally, current fear in the markets is depressing the price of these funds. Floating-rate bond funds may be a bargain.
* This commentary and is designed to stimulate thinking. This commentary is not a recommendation to buy, sell, hold or sell short any security (stock ETF or mutual fund).
