Friday, February 15, 2013

Remaining Cautious with Retirement Savings

Like many others, our retirement savings have benefited from the late 2012 to early 2013 stock market rally.  However, if something seems too good to be true, it probably is.  The market rally of the past few months falls into this category.  Therefore, I still continue to be on the cautious side with our retirement savings and fund for our short term (3-5 year) livings expenses.   While we have recovered almost all of our losses from 08/09, I still remember the feelings of despair at the bottom in 2009.   I would like to avoid being there again.

Here are some reasons for my concerns:

  • Triple top  -   If the market index pulls back from the recent high, the market will likely go down.  This is common indicator of a possible market decline for technical analysts. 
  • EU sovereign debt  - This lurking issue has been out of the news lately.  The EU central bankers have been able to cajole markets to believe the risk is being managed.  Talk can only go so far before they need to really deal with it.
  • U.S. exit from QE -  QE has been reflating assets such as the stock market, bonds and real estate.  However, QE can only be temporary and must end.   The resulting credit contraction could be very negative for the economy.
  • On the positive side, businesses are doing well and running very lean.  If the economy should expand, I expect there will be significant upside to the stock market.

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

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