What Now?
The markets seem to find a way to cause maximum pain to the largest number of people. A year ago, investors were generally very bullish and their portfolios where higher in risk then their true risk level thresholds. The October to March time period caused many investors to capitulate to a defensive portfolio position only to have the market rebound, leaving many in the dust.
From a technical standpoint, the market has reached an equilibrium point between bulls and bears and seems to be setting itself up for a long period of slow economic growth. The next economic recovery will likely begin in 2010 and it may feel like the recession never ended. The factors leading to a long, slow global economic recovery will be: U.S. consumer retrenchment, financial sector deleveraging, weak commodity prices, increased government regulation and involvement in the economy, protectionism and deflation. These factors are longer term in nature and it will take years, not months to change the path we will travel.
This is not bad news, it is just the likely landscape we are left to navigate. Today is always the right time to evaluate your investment portfolio, fairly evaluate your true risk tolerance and set realistic investment goals. Building a diversified balanced portfolio that provides for upside participation, income generation, and a downside cushion is the successful formula for the long slow ride back to a healthy economy.