The Dow Jones has had 10 consecutive days closing in the green, a streak not seen since the mid-1990s. Both the Dow and the S&P are at or near all-time record highs.
That's what happens when you flood the markets with liquidity, which the Federal Reserve has done with trillions of newly-printed money over the past several years. It's currently juicing the money supply to the tune of $85 billion per month. All those dollars have to go somewhere. And their now finding their way into financial securities.
So, has the Fed won? Has the crisis been averted?
Should we just accept the maxim: "Don't fight the Fed", jump in the markets fully and let the rising flood of money carry our stock portfolios to the moon from here?
Hardly.
In this week's podcast, Chris puts the tough question to Bob Fitzwilson (one of Peak Prosperity's endorsed financial advisors): Can one prudently invest in today's logic-defying markets?
Bob's short answer is: yes. Perhaps more than ever, old-school fundamantal analysis matters – stock picking in the true, nose-in-the-numbers manner. For as the Fed's money injections reach their point of diminishing returns (which there's growing evidence they have), the tide lifting all stocks will reverse, and only those companies with real merit will maintain (or lose less of) their valuations.
Like Chris, Bob sees the potential for a large market correction as the Fed liquidity binge effect wanes. So, in his eyes, now is not a bad time to sit on the sidelines in cash and equivalents. If indeed a correction occurs, there will be an attractive opportunity to deploy dry powder selectively into those companies with verified fundamental value.
But it's hard to have the fortitufe to do this when the world is cheering the return to easy stock gains. Of course, those are the times when the greatest number of 'greater fools' are in the game. It's wise not to be one of them.
If after listening to this podcast, you find yourself interested in connecting with Bob and his team to learn more about their advisory services, please use the form here to do so.
Transparency note: As a result of our public endorsement of Bob's firm, Peak Prosperity has a commercial relationship with them. The details of this relationship are clearly presented in writing during the referral process — but the punchline is, our relationship does NOT result in any increased fees to those who become clients.
cheers,
Adam
It should go without saying: this discussion should not be construed as individual financial advice by those listening to it. The content should be taken as informational and educational in nature only. Investment advice must be tailored to your specific personal situation (which Chris and Bob are obviously unaware of) and should be obtained directly from a financial advisor you trust. Before acting on any of the statements made in this podcast, we advise you do just that.
Click the play button below to listen to Chris' interview with Bob Fitzwilson (38m:37s):
by hotrod