Sunday, November 07, 2010

Going Bullish

After evaluating the market results of October and the past week, I've turned very bullish for the near term. We currently have 37% of our savings in cash, money market funds and short term CDs. During November, I plan to move at least 7% into stock investments and may go as high as 20%. The remaining 17% will remain in cash or other short term cash equivalents and is equivalent to 4-5 years of living expenses which we have decided to maintain on a going basis. In addition, we will not sell any current equity holdings, with the exception of my company stock which I am consciously trying to reduce.

Here are the reasons that I've become firmly bullish for now:

  • Low interest rates will continue. The Fed has committed to keep interest low with QE2. Low interest rates are good for business and will eventually be good for the stock market.

  • Weak dollar. The low interest rates will keep the dollar weak. Thus, dollar denominated earnings of multinational corporations will increase. In addition, a weak dollar will make U.S. exports more attractive.

  • Great earnings reports. Many business continue to report excellent earnings and promising forecasts. In some cases, the past quarter was the best every quarter in the history of the company, e.g. Intel. Also, many businesses are operating with a lean staff. As the economy improves, businesses will need to hire.

  • Midterm election results. With the new Republican majority in the House of Representatives, their is a belief that the Bush tax cuts will be extended and government spending will be reduced. Whether or not this occurs is still to be seen. However, for now, perception seems to be reality.
  • For now, I believe the stock market rally still has a way to go and I plan to participate by increasing our equity exposure.

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    This is not financial or investing advice. Please consult a professional advisor.

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