Only Three Months Until 2011, So Plan Now

Thursday, June 3, 2010

What fun! Looking ahead to the New Year, as we write off the past and focus on the future. No, my calendar isn’t broken. I’m talking about the stock market’s New Year’s celebration.

The stock market’s calendar is ahead of ours

Stock market investors and analysts are always looking to the future, most often about three to six months out. Thus, 2011 enters their field of vision just after Memorial Day – i.e., now.

Summer rallies can be borne from this shifting focus, particularly if spring has been a bust (it was) and the July/August earnings reports are positive (they’re expected to be).

Then, just after Labor Day, 2011 will take center stage. Wall Streeters, returned from their end-of-summer vacations, will be refreshed and ready to focus on the future. This will be the stock market’s New Year’s day for 2011.

Prepare now for the celebration

To take advantage of what’s in store, we need to prepare now. This means putting ourselves three months from now, past today’s news and with a focus on 2011.

No, we can’t get a jump on the professionals at estimating earnings and corporate events. But we can understand and rely on the basics – the long-term forces that underlie the economy, corporate management and investor behavior.

I’ve talked previously about the need to have the right frame of mind when making investment plans. Looking to 2011 can do this by freeing us from today’s (and yesterday’s) “short-term” (i.e., passing) events, beliefs and actions.

What we know is good

So, what do we know?

  • The world is committed to supporting the global economy and financial system
  • The US economy continues on its more than 12-month improvement path
  • The US financial system is operating well
  • The US’s major non-financial corporations are generally well organized and financed
  • The US’s technological development prowess continues
  • Many investors remain underweighted in US stocks

With these factors at work, future growth prospects look good for the economy, corporate earnings and the stock market.

So… With stock prices down and the nearness of the stock market’s 2011 New Year, it’s an excellent time to prepare by owning sound US stocks and US stock funds.

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John Tobey on Seeking Alpha

Seeking Alpha Certified

June 2010