The following is a client piece sent out by a leading LPL Financial advisor, Marc Freedman. Marc was recently selected by Barron's Winner's Circle as one of Boston's Top 50 Financial Advisors and he has served on the Board of Directors of the national Financial Planning Association (FPA).
The markets appear to be going through a global selloff, which in our opinion has more to do with Euro-related concerns than it does with the recent deal in Washington.
Lost in the headlines are the facts that corporate profits remain strong, new jobs are being added, bonds have strengthened (despite the debt ceiling talks) and exports have exceeded expectations.
Yet, in our humble opinion, despite finally approving "the debt deal", our country is disappointed with leadership in Washington. They have lost trust with the characters who oversee the future of social programs such as Medicare, Medicaid, and Social Security; and they continue to carry this insatiable grudge towards the corporate world. This grudge persists despite most businesses returning to profitability, making money for shareholders, and seeming to be the most transparent of anyone.
The Euro crisis, although a world-wide issue in the short term could ultimately be a win for domestic stocks. The dollar could begin to strengthen, and the world's perception of the US could change as people begin to realize that key issues are more likely to be resolved quicker here than in other places.
Stocks are also falling on the proposed fear that markets will continue to pull back. Brokers are fielding a disproportionate amount of sell to buy orders and that alone is adding further pressure to the markets. In a market correction which is only a couple weeks old; we think fear-based selling is short-sighted thinking for long-term investors and could potentially be viewed as a buying opportunity.
Finally, we need to remember that despite the headlines that read "Free Fall" and "Plunge," the Dow Jones Industrial Average sat at close to these levels once in mid-March, as well as in early January of 2011.
We think we're simply going through a brief correctional period; one that may get messier, before it gets better - but certainly one that doesn't suggest any irrational or emotionally infused tactical moves.
In our opinion, keeping a rational head is what's best in these times.
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