Practical Prosperity: May 2011

The Unexpected Recovery

Did you know that the Internet can now read minds? Here's the proof: http://www.youtube.com/watch?v=Hc1WXBtum2o&feature=related.

Just two months ago, the world celebrated an unusual two-year anniversary: 24 months from the low point in the global markets, the point of maximum pain and panic following the 2008 economic meltdown and so-called Great Recession.

On March 9, 2009, the S&P 500 had fallen to its low of 676, which is about where it had been in October of 1996--13 years before. Since then, the S&P index has gone up about 107%, bringing it within 13% of its record high in 2007. The Russell 2000 index, which tracks small cap stocks, has gone up 139% in the same period, and the MSCI Emerging Markets Index is up 149%.

If you look back at the economic forecasts and market reports in March two years ago, you don't find, anywhere, a prediction that the markets would recover as they have. There was even some doubt whether the U.S. economy would survive intact, and the most common prediction was deflation, continued recession and more downside in the stock markets.

In retrospect, this most frightening time was the ideal time to shove all the chips on the table and bet everything on a stock market recovery – but who had the intestinal fortitude for that? After the losses that virtually all investors had sustained, no matter where they had deployed their assets, few had the stomach, or the heart, to bet on a robust recovery. This is a terrific lesson in the value of disciplined investing; the consensus and our own gut feelings are often wrong and inevitably point us in the opposite direction from where the returns are going to come from next. In the past, every long-term upturn has been greater than the losses sustained in the prior bear market. We don't know how this one will end, but it seems to be following the same seemingly unlikely, but not unusual, course.

As an investment advisor, it pleases me to see that clients stayed the course with us. The investment world is more complicated now than ever, which makes it even more fearful for many. High yielding, United States value stocks are still great investments, however as the United States slips in world market share, dozens of additional asset classes must be considered part of the mix.

At Mackey Advisors™, we would love for those of you who have not been introduced to our investment philosophy to stop in and see us. For those of you who take the “do-it-yourself” approach, never leave a stone unturned. There is opportunity abounding everywhere, even in a changing global economy, so seize the moment and let prosperity thrive.

By Andy Pulsfort