Dow Tumbles Another 246+ Points on Friday
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You associate luxury jeweler Tiffany & Co. and American Express Co. with people of affluence. When these companies start issuing warnings, things may indeed be getting tight!
Friday, Tiffany & Co. said that its U.S. sales slumped during the holiday season. American Express Co. warned of rising delinquencies and slowing spending among its cardholders. These companies joined a slew of others with close ties to consumers sounding alarm bells. Some of the retailers, including Kohl's Corporation, cut earnings projections after reporting weaker-than-expected sales Thursday.
The rising fear of recession sent the Dow Jones Industrial Average down 246.79 points to 12606.3 Friday and it now stands off 5% for the year. The Standard & Poor's 500 stock index dropped 1.4% or 19.31 points to 1401.02 and with Friday's loss is down 4.6% for the year, making it the 4th worst start in the S&P history, which dates back to 1928.
The consumer, who accounts for 70% of the gross domestic product or the total of all goods and service produced in the U.S., is getting hit on a number of fronts. Credit markets, energy prices, housing etc. are combining to put restraints on consumer spending. To be sure, U.S. consumers have been resilient in the past, in spite of increasing worries about the housing downturn. But now there is growing evidence that consumers are cutting back on spending as they wrestle with heavier credit expense and debt.
Many economist however, put the odds of a recession at just 40%. Whether we are now or will fall into recession is the source of much discussion. Certainly those who have invested in gold recently seem to think the odds of recession are growing.
Gold hit an all-time high last week at $900 per ounce, but when adjusted for inflation gold would have to hit near $2200 per ounce to have its worth at an all-time high. Bank of America has taken a sanguine position on the future with its $4 billion acquisition of Countrywide Financial Corp. Bank of America executives obviously believe that the dramatic retooling Countrywide has done on its mortgage operations over the last months make it worth having. Also we are in earnings season and reports received so far have not been all bad.
In times like these, it is essential that your investments be carefully monitored. Some adjustments may have to be made, especially if you have reached a certain age or are within 5 years of retiring. No single asset allocation and diversification policy will work for you over your entire life. Getting the maximum return at any given risk level is difficult to achieve. Review your financial plan. In the present environment of high volatility in the markets, you may have to change your recipe to get more even baking.
If something is volatile, it is by definition changeable, fickle, easily aroused, explosive. The markets have surely met this description in the past months. There have been many ups and downs to prices in the markets. We like volatility .....when it's up. It's the going down that makes us anxious. It is important to keep things in perspective. At the moment we are in a correction phase and not a bear market. We have to keep a sharp eye on movements in the economy and adjust accordingly.
Don't overreact to newspaper headlines and remember to keep your risk within your tolerance and keep ahead of inflation.
I invite your questions.
Or Contact Jerry Cole at:
509 Center Ave, Suite #102, Bay City, MI
(989) 892-5055
(The opinions expressed are solely those of the author and not Gen worth Financial Securities Corporation.)509 Center Ave, Suite #102, Bay City, MI
(989) 892-5055
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Jerry Cole - Retirement, Investment |
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