Many investors entered 2007 with positive expectations for the year ahead. In fact, a substantial number of large cap companies reported double digit income growth in the first quarter of the year. Pundits immediately chimed in with rosy prophecies of continued expansion.
Here’s an example:
Around that point in time, Ken Shea, Managing Director of Standard & Poor’s Equity Research Services stated, “…it’s possible that the momentum of the economy and first-quarter earnings could carry over into the second quarter…”
“…Given the robust earnings across a broad range of sectors and the low relative price-to-earnings ratio on the S&P 500, we’re bullish on the S&P 500 and believe there’s an opportunity for the index to produce an 11% total return in 2007…”
Since that day, the S&P 500 index has dropped by more than 7.73% in about one month of trading. Mr. Shea was not the only one mistaken. Many investors and so-called experts made the same judgment call and emotionally poured money into what they were hoping was a “hot market.” Today, we are hearing an altogether different story.
“The figures raised speculation the Federal Reserve will continue lifting interest rates to curb inflation, even as the economic expansion decelerates. Producer prices, excluding food and energy, came in higher than estimates.”
Did our world economic outlook change that much from May 5, 2007 to June 13, 2007? That’s less than 26 trading days! The answer is NO! All the pressures mentioned today were already bearing down on our economy one month ago. The key is to understand the source. Remember, market makers and promoters primarily make their money when they help investors BUY and SELL securities.
Over the last few weeks you can almost hear them yelling, “BUY! BUY! BUY!” only to be followed with “SELL! SELL! SELL!” a few days later.
Does an investor really win? Now overlay this environment on a retirement account that represents a lifetime of saving. This money MUST last a lifetime.
Over the long haul, traditional fixed and fixed indexed annuities have proven to be a great choice for safety minded people who want to sleep at night knowing their money is NOT losing value.
Contributed by: Unkefer and Associates