To invest or not to invest?
by Peter Switzer
With reporting season hotting up in the US this week and the 2 August deadline looming for the US Congress to sort out its deficit and debt ceiling impasse, the question is — are we staring at a buying opportunity or should we just sit it out until the trend is our friend?
The answer will depend on your investor risk profile but before having a crack at it let’s recap on the important need-to-know facts and upcoming events that could affect your decision.
Over the weekend, our time, the Dow went up 42.6 points to 12,479.73. The S&P 500 was up 7.27 points to 1316.14. The VIX or fear index is just under 20, which indicates low-level investor fear.
In Europe, eight banks failed stressed tests. Five of them were Spanish and two were Greek, while one was Austrian. The fact that the market went up means they couldn’t have been important banks. That said, this is a concern, although it’s understandable given the problems in Europe.
Meanwhile, US consumer sentiment fell and this didn’t help the market but this is also understandable given the bad run of economic data lately, which I think will be temporary.
Adding to the gloom merchants’ tales of woe, gold hit an all-time high of US$1589.80 an ounce. But on the flip-side, oil’s price heads up and that is generally a sign that economic activity is supporting demand pushing up prices.
On the good news front, industrial production was up in June and that was the first rise in three months. This could be a sign that my “temporary slowdown” view might be on the money.
Worrying the share market is the vote ahead to raise the debt ceiling and this is spooking some investors but the feeling is a solution will emerge. Politicians always play these games because politics is more important to them than the economy or investments. They are such babies and that’s why we often lock them up in cities that no one would ever want to live in!
Companies reporting this week
On the company earnings front, IBM, Bank of America, Coca-Cola, Goldman Sachs, AmEx, Intel, Morgan Stanley, Microsoft, Caterpillar, McDonalds and GE report this week.
This is a swag of important companies and if they beat on the high side and have positive outlooks, then this market could take off this week or vice versa!
The risk-taker might buy today and the nervous Nellie might wait until week’s end or even another week to see the trend. On the other hand, if you are in-between, you might put half in today and half in when the trend is up and not looking to bend.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Monday, July 18, 2011
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