The US stock markets have just completed a spectacular 13-week run. The broad stock markets have gone up 12 of those 13 weeks with the “riskier” of the sectors (paper, steel, auto, leisure and energy stocks) performing well. By comparison, the US Treasury Bond market, has posted losses during the same period. It is truly amazing after such a devastating first quarter where most investors concentrated on news about the 10 percent national unemployment rate that the second quarter has represented such a turnaround. This time investors have taken the approach that the glass is half full, and it is a good thing that 90 percent of us are still employed.
Long-term sectors that have minimal government intervention will have the best job creation and will have the best opportunity to grow wealth. In the meantime, the United States Congress is doing their part to come up with more ways to create jobs. If it will mean votes coming their way in the next election, it will be considered.
Take this example any 8-year-old can understand. The United States Post Service (USPS) is considered one of the most trusted federal government agencies. Recently the USPS pulled all the stamp machines out of their offices. Labor saving technology like stamp machines reduce the need for government jobs and has no place under the current leadership in Washington. Just imagine if your local grocers stopped using barcode technology and hired more stockers to manually stamp prices on the product. The grocers could also create more jobs by hiring more cashiers. Think of all the new accounting jobs we could create to manage the new system. Expand this way of thinking to the government takeovers of Citigroup, General Motors and AIG.
Having made a brief political commentary, here are some areas investors should consider for the foreseeable future.
Technology is an area which deserves immediate attention. Technology as a class has shown to do well in good and bad economic environments. I believe modernization of companies will always include technology upgrades. Since the government has recently chosen to go the opposite way at the USPS, this confirms my belief that technology may be an integral part of a diversified portfolio. As an investment class, technology companies tend to have low leverage.
Overseas growth should continue at a faster pace than US growth and a well-diversified portfolio will have a diversified position overseas. Until the cost of labor is reduced in the United States to compete with foreign manufacturers, overseas investing will be promising.
Energy, agriculture and metals will be in demand as populations continue to grow. Investment benefits are the dwindling supplies on the planet or in the case of agriculture, the dwindling irrigable land for farming.
Massive bailouts and stimulus packages will ultimately exhaust and add inflation. Inflation will help commodities, however, asset inflation - both real estate and stocks - will rise over time.
Investors who want to earn higher interest rates and do not want to enter the securities markets can expect interest rates to rise over time. Investors who own Certificates of Deposits need to be patient. Higher interest rates will prevail with time. Investors can also use U.S government I-Bonds. I-Bonds pay interest partially on a fixed rate and partially on the rate of inflation. As an added benefit, the interest may have tax benefits if used for education.
Investing just like so many things in life has always required patience, and this year is proving to be no exception to that rule.
About the Author:
Peter Miralles is president of Atlanta Wealth Consultants, a boutique a wealth management firm in Atlanta, Georgia. He is a certified financial planner, charter life underwriter and certified investment management analyst.
He has worked in the financials services business for more than two decades - most recently with H&R Block - before launching his own firm nearly two years ago. His clientele is comprised primarily of retirees and affluent individuals. Peter can be reached at (770) 394-4448 or email: firstname.lastname@example.org. The firm’s Web site is www.atlantawealthconsultants.com.
Registered Representative, Cambridge Investment Research, Inc., a Registered Broker/Dealer, Member Finra and SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor.
Cambridge and Atlanta Wealth Consultants, LLC are not affiliated.