A Quadruple Dip in Confidence

Wednesday, June 2, 2010

The month of May brought thoughts of, “Here we go again!” And no wonder. Starting two years ago, stock investors have been buffeted by large uncertainties, bad to terrible news and losses that still haven’t been recouped.

However, I believe today’s investor angst is overwrought, caused by what went on before as much as what is happening now. Here is where I see the four dips in confidence that investors have had to contend with:

Yesterday, I mentioned (in item #4) that similar periods can produce different investor reactions, based on what went on before. Current concerns are a good example. The recent bad news has brought back visions of what we have already been through, making predictions of a double economic/financial dip seem appropriate. Although we know that lightening doesn’t strike twice in the same spot, we can just see that bolt hitting again.

Another impetus is not wanting to repeat a mistake. After missing a previous market decline, investors can become hypersensitive to any subsequent dips. Like the weatherman who didn’t forecast the blizzard, every subsequent snowfall looks ominous.

Ah, June. In the US, gateway to summer – and the hurricane season

The question before us is what will rule the US stock market. Calm, happy days of sunshine or wild, fretful days of destruction? Or, like life, a combination of the two?

My vote is for the combination, with sunny (okay, partially cloudy), improving trends continuing to push the US economy and corporate earnings ahead. These drivers will support a rise in the US stock market, although foul weather can pop up at anytime.

So… Don’t let today’s news reverse your investing focus to 2008/2009. For good future returns, we need to keep looking ahead to the rest of 2010 and beyond.

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John Tobey on Seeking Alpha

Seeking Alpha Certified

June 2010