Recent events have shown us the volatility of financial markets, with user sentiment swinging dramatically. Yesterday’s market selloff is a prime example of this unpredictability.
Gold took a significant downturn, falling below $1,330, adding to the decline experienced last Friday. Observing the fluctuations in the bullion market, the stock market responded by plummeting as well, with the S&P 500 dropping 36 points and the DOW decreasing by 265 points.
To compound matters, yesterday marked the 100th anniversary of the income tax, often viewed as a means of governmental property confiscation. Just when it seemed the day couldn’t worsen, a shocking explosion occurred at the Boston Marathon. Our thoughts are with all those affected.
As we navigate these chaotic times, let’s delve deeper into today’s reflections.
Have you ever heard of the “spring swoon”?
This term recently came to our attention last Friday, describing a phenomenon where, after a robust first quarter, the economy stalls in the second quarter, resembling a sagging flour sack on a bakery floor. Alarmingly, this pattern has emerged every spring for the past four years.
According to the Commerce Department, March retail sales decreased by 0.4 percent. Following this news, Mark Zandi, co-founder of Moody’s Economy.com, spoke to the Daily Ticker, predicting we are entering a “spring swoon.”
Zandi remarked, “Growth is likely to be sluggish in the second and third quarters. We might be fortunate to achieve 2 percent GDP growth during this period.” He also views this spring swoon as more coincidental than a structural issue.
“A series of shocks seem to align with the calendar, resulting in this effect over the past four years,” he elaborated. “Additionally, there are some seasonal adjustment concerns. The recession’s impact, which began at the end of 2008 and the beginning of 2009, has influenced how data is seasonally adjusted, making the ends of the year appear stronger and the middle months weaker.”
More Will Be Revealed
So, is Zandi correct? Will we experience another spring swoon?
Your assessment is as good as anyone’s. However, starting this week, more insights will emerge as major companies on Wall Street release their quarterly earnings.
Big banking institutions such as Goldman Sachs, Bank of America, and Morgan Stanley, along with tech giants like Google, Microsoft, and Intel, and major commercial players like General Electric, McDonald’s, and Johnson & Johnson, will share their financial updates. These reports may provide clues regarding what America’s largest firms anticipate for the upcoming quarter.
If Zandi is correct, a slowly growing economy may already be a reality. This will inevitably complicate job searches for those seeking employment.
Up until yesterday, the stock market appeared unaffected. Investors seemed unperturbed by signs pointing to economic sluggishness, instead focusing on elevating prices to unprecedented levels. The correlation between the economy and the stock market seemed to have vanished.
Indeed, last week the DOW and S&P 500 reached record highs, suggesting investors were unconcerned about weak retail sales, a potential exit of Cyprus from the eurozone, or tension arising from North Korean missile threats.
Get On the Road to Riches Today
In contrast, genuine investors, as opposed to mere speculators, are not swayed by a stock’s inflated price as a result of a bullish market. They prioritize factors such as yield, the stock’s price attractiveness, and the safety and growth of dividends. Real investors focus on the cash flow a stock generates and its ability to build wealth through reinvestment of dividends.
These aspects matter little to the pretenders. The naïve investors who impulsively buy Apple stocks at their peak often overlook these crucial details. Unfortunately for them, these mundane details can ultimately lead to wealth accumulation.
Many individuals never seem to reach the level of patience and strategy required to think like a true investor. They often become distracted by daily price changes, limiting their investment decisions to the emotional ups and downs of the market, and, regrettably, end up losing money.
However, a simple mindset shift can allow anyone to elevate their status from a novice to a knowledgeable investor. Investing is fundamentally about saving and wealth building, not about gambling or speculation.
Thus, an investment in a company’s stock, much like an investment in rental property, is focused on creating a revenue-generating asset. The potential appreciation of the stock’s price comes second.
So, why not give it a shot? Initially, it may seem unexciting. But before long, you might find it rewarding. Embarking on this journey could place you on the path to financial prosperity. For baby boomers nearing retirement, this approach presents a crucial opportunity to convert savings into reliable income for the future.
Sincerely,
MN Gordon
for Economic Prism
Return from Get On the Road to Riches Today to Economic Prism
