{"id":1341,"date":"2011-08-09T08:35:19","date_gmt":"2011-08-09T13:35:19","guid":{"rendered":"http:\/\/www.billlosey.com\/?p=1341"},"modified":"2011-08-09T08:35:19","modified_gmt":"2011-08-09T13:35:19","slug":"a-time-for-patience","status":"publish","type":"post","link":"https:\/\/billlosey.com\/knowledge-center\/a-time-for-patience\/","title":{"rendered":"A Time For Patience"},"content":{"rendered":"<p><strong>As expected, a plunge.<\/strong> World stock markets swooned on August 8 in reaction to Standard &amp;  Poor\u2019s downgrade of U.S. long-term debt. On Wall Street, the DJIA fell  634.76, the S&amp;P 500 79.92 and the NASDAQ 174.42. It was the toughest  day on Wall Street since December 1, 2008, when the National Bureau of  Economic Research announced America had lapsed into a recession.<\/p>\n<p><sup> <\/sup><\/p>\n<p>Investors  endured a shock like this last year. In spring 2010, the S&amp;P 500  pulled back 16% from a peak. At the close on August 8, the index was  down 16.8% from its spring 2011 high.<\/p>\n<p><sup> <\/sup><\/p>\n<p><strong>In 2010, the market healed within a few months.<\/strong> What happened after the 2010 correction? We had a sustained rally from  September to New Year\u2019s Eve. The DJIA finished 2010 up 11.0%, the  S&amp;P 500 up 12.8% and the NASDAQ up 16.9%.<\/p>\n<p><strong> <\/strong><\/p>\n<p><strong>When will we see capitulation?<\/strong> Yes, when will this mood lift? When will investors see merit in buying?  Several factors might encourage a relief rally or something greater.<\/p>\n<ul>\n<li>The European Central Bank plans to buy up debt from Italy and Spain.<\/li>\n<li>The  Federal Reserve could decide to buy up 10-year Treasury bonds and other  long-term notes, echoing a move it made during the early 1960s.  Economists and bond market analysts are beginning to think we could see  this kind of QE3.<\/li>\n<li>Amid  the heavy volume, bargain hunters will inevitably start shopping. As  Suze Orman told CNBC August 8, \u201cThis is a gift from the stock-market  heavens \u2026 in 2008 we had far grander problems than we do today. But by  March of 2009, the stock market was rising again. What makes you think  that won\u2019t happen again?\u201d In this correction, dollar-cost averaging  could potentially snag great values.<\/li>\n<li>Some  positive signals can be found in the turmoil: falling oil prices imply  lower retail gasoline prices for consumers, the manufacturing and  service sectors are still growing, interest rates are quite low and  corporate profits have nicely improved. As to the chance of a double-dip  recession, the U.S. economy is projected to grow 2-3% in 2012, which is  about double the growth forecasts for the European Union, Great Britain  or Japan.<\/li>\n<li>Nobody\u2019s  running away from Treasuries. In fact, Treasury yields sank 0.18%  August 8, making it cheaper for the U.S. to finance its debt.<\/li>\n<\/ul>\n<p><strong>How might the downgrade of Fannie &amp; Freddie affect the housing market?<\/strong> It might impact consumer confidence more than anything else. S&amp;P\u2019s  August 8 downgrade of Fannie Mae and Freddie Mac to AA+ from AAA didn\u2019t  immediately shake up the mortgage market, as 10-year Treasury yields  were down to 2.40% Monday.<\/p>\n<p><strong>Moody\u2019s affirms America\u2019s AAA rating. \u201c<\/strong>Despite  the outlook for some further deterioration in the government\u2019s debt  metrics over the coming few years, we believe that the U.S. continues to  exhibit the characteristics compatible with an AAA rating,\u201d Moody\u2019s  Investors Service senior credit officer Steven Hess wrote in an August 8  note. Moody\u2019s also noted America\u2019s longstanding track record of  economic growth as a big reason for confidence. Fitch Ratings also  refrained from a U.S. credit downgrade, and both Moody\u2019s and Fitch  stated that the possibility of sovereign default was remote.<\/p>\n<p><strong>Relatively speaking, stocks still look cheap next to bonds &amp; cash.<\/strong> As the dust settles from these big market drops, Wall Street will have  to weigh its collective direction. On the one hand, you have rampant  anxiety; on the other hand, you have attractive valuations. Patience may  prove to be a virtue as the saga plays out and we eventually return to  market fundamentals.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As expected, a plunge. World stock markets swooned on August 8 in reaction to Standard &amp; Poor\u2019s downgrade of U.S. long-term debt. On Wall Street, the DJIA fell 634.76, the S&amp;P 500 79.92 and the NASDAQ 174.42. It was the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-1341","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1341","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/comments?post=1341"}],"version-history":[{"count":0,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1341\/revisions"}],"wp:attachment":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/media?parent=1341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/categories?post=1341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/tags?post=1341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}