Peril or Opportunity?

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Everybody talks about “the market” but each company in the market has its own story. We need to revisit this to understand the errors we perceive in a currently popular theory.

Some say that actions by the Federal Reserve and other central banks have artificially pumped up asset prices across the board, so there is no safe place to invest. When we look at the pieces of the market, however, a different story emerges.

Some sectors are far below their peak prices from many years ago. Many oil and natural resource companies are trading at only one-third to two-thirds of past high points. The financial sector has actually lost money over the decade ending July 31st.1

Within these and other sectors, we see opportunities. So we reject the idea that everything is too high to own.

At the same time, we know that there are distortions and potential bubbles in some parts of the investment universe. Even though we know the Federal Reserve will eventually get it right (because the markets force it to), we’ve described why we do not like current policy. We have also talked about the potential bubble we see in the bond market, and what might burst it.

Bottom line, the investment universe has rarely been this interesting. It contains both opportunity and peril, the potential for growth and stagnation. As always, we are studying hard to understand the pieces we should own. Please call or email if you would like to discuss your situation.

1As defined by Standard & Poor’s and calculated by State Street Global Advisors


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.