Markets around the world pronounced a sigh of relief today as European leaders agreed on a deal with Greek bond holders to further write-down Greek bonds, increase the region’s “rescue fund” to $1.4 trillion and to recapitalize European financial institutions. Broad U.S. markets finished up around 3% while several European markets rose 4%+. Riskier assets that had fallen more in the selloff also rebounded more today. Smaller cap stocks, rose close to 6% today. Financials, both domestic and abroad, have responded the most, rising 8-12% across the board.
Since October 3, the market has unwound much of the damage done in July through September as markets have recognized Europe’s progress on stemming systemic default risk and the improving likelihood that the U.S. will avoid a double dip recession. Markets lead expectations. When most market participants woke up to negative trends, the market was already down and when most of us wake up to better news, the market is already up. That is the definition of a leading indicator.
We encourage long term investing for long term goals. Only have money in the stock market you don’t plan to spend in the next 5-7 years or more. While we don’t know what will necessarily happen in the shorter term, we know that stocks provide the best returns available over the longer term. We rebalance opportunistically, buying the dips and selling the rally’s, when individual positions get out of balance by more than 10-20%.This forces a buy low, sell high process which ads value over time.
Please call the office with your questions or concerns.
