Tahoe Market Pulse: On Brexit and the media
I’ve written about how the financial media often distract investors from their long-term goals. The Brexit sell-off and quick recovery provides another good example.
Did you notice how reporters said people lost a lot in their 401Ks after the market fell, but failed to mention how much was gained when the market recovered? A casual observer would think you can only lose in the stock market.
The ramifications of the U.K. exit from the EU are far from clear. For starters, it won’t take effect until two years after the U.K. invokes Article 50 of the EU agreement, which allows a country to leave.
PM David Cameron said that won’t happen until October at the earliest under a new Prime Minister. The U.K. will then have two years from October to negotiate trade deals with the EU countries.
So why the initial pessimism about conditions two plus years out? Would you be confident forecasting where the market will be in 2018? I wouldn’t be.
Bad news sells, so the two-day decline was front-page reading and lead-story viewing while the pre-vote rally and last week’s recovery were pretty much ignored.
Lost in their coverage was any perspective. Yes, the Dow fell 616 points in one day, but that was giving back recent gains and put the market down all of one percent from where it was a week earlier. Such a small decline would not be newsworthy except that it happened in one day. If that were a one-percent gain, it wouldn’t be covered at all.
No one should make investment decisions based on Brexit or votes that will probably happen in other EU countries. The market rebound illustrated how dangerous such knee-jerk selling can be.
Far too much cash is on the sidelines. Trillions. Where should it go? High-yielding stocks will continue to attract more and more. They are better values with higher yields and more growth potential than the alternatives. I continue to like preferred stocks, which I wrote would be the year’s best performers. So far, so good.
In the end, interest rates will remain lower for longer. That’s why dividend paying ETFs (Schwab Dividend Equity, Vanguard Dividend Growth, ProShares Dividend Aristocrats, PowerShares Low Volatility, etc.) all closed the quarter at all-time highs.
Some say this is a difficult market for investments. These dividend payers say otherwise.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.