Investor anxiety reigns!
BY CARTER E. ANTHONY, CFA
A friend asked last week what should he do? He said, “I don’t have much money but what should I do with it? Should I stay invested and have my gut wrenched almost every day with some world problem?
“Should I liquidate and put it all in money markets at low rates? Should I buy all U. S. Treasuries, trusting our government although its bonds were just downgraded by a second ratings service?
“Or, should I liquidate, put my money in a can and bury it in the backyard?
Truly, the world is in a state of flux. There is more concern about things in the world today than ever before.
Domestically, our nation’s debt is greater than ever and growing daily. Some say it is a ticking time bomb. No one seems to take it seriously.
After four years of a spineless administration, illegal immigrants have overrun our country and are violently protesting their deportation.
If a country can be destroyed by being overrun by illegal immigrants, the Biden administration has allowed it to happen in search of democrat votes.
Downtown city centers are under siege; downtown stores are being looted and burned especially in lawless blue states.
Internationally, the three year war between Russia and Ukraine continues, the two year war between Israel and Hamas continues and Israel has begun attacks on Iranian nuclear facilities.
Russia’s Putin continues to give the world a head-fake, “now you see me, now you don’t” agreeing to a cease-fire for a weekend then directly attacking Ukraine mid-weekend.
Negotiate all you want with representatives but the end will only come when Putin wants it.
Houti Rebels, backed by Iran, in Yemen are openly attacking international shipping lanes in the Red Sea disrupting supply lines.
Most of the world is unhappy with the United States because President Trump is trying to get it to play fair in international trade. Yes, the world is truly in a state of flux.
How has the investing world reacted to all the clouds hanging over it?
In April, after the president’s Independence Day over tariffs, the growth stock indices, S&P 500 fell 18% and the NDQ fell 23%, and some pronounced the world was ending over tariffs.
The downturn was not surprising given the outcry from supposedly-all-knowing Wall Street gnomes and the media.
What would have happened if the president had simply put the tariffs in place, negotiated and not announced to the world? But that is not his way of doing things.
Investor’s Business Daily (IBD), a highly regarded research firm, just distributed its latest report.
The turn in the markets from the downturn in April was one of the fastest recoveries on record, 18% in five days.
So much for the writer who compared tech stocks to over-the-hill Hill Clinton. He was probably a value investor cheering the decline.
IBD quotes long-time investor Edward Yardeni as saying the S&P 500 will grow 7.5% from here to yearend and tariff talks will become back-page news and hardly exist in 2026.
The S&P 500 price/earnings ratio (PE) as of May 31 was 21x, not far from its 22x in the best of days.
Wall Street analysts predict sales and earnings to continue to grow through 2026. IBD sees continued growth of GDP in the 3%-4% range and a continued good economy for the foreseeable future.
No “golden age” as predicted by our president but no depression as wished for by some of the other party’s leaders.
So, stay the course, Mr. Individual Investor. If you are invested best for your age, your assets and liabilities and your stage in life, do not put it in a can and bury it.
Best sectors for the next 18 months are technology, health care and communications services (IBD).
