By Jeff Voudrie
The landmark decision on Obamacare on June 28th by the Supreme Court removed another ‘uncertainty’ that was supposedly holding back businesses and the financial markets. Couple that with the recent statement from Europe that there is going to be a mechanism to directly bail out the banks and financial market sentiment has been perking up. In light of this, many investors are wondering what to do — especially those who are retired and trying to successfully manage their wealth through these difficult and trying times?
Unless you already have minimal equity exposure, I recommend that conservative investors use any further equity strength as an opportunity to lighten up on equities.
There are several reasons, yet here are four of them:
1) The Supreme Court decision isn’t going to result in additional economic growth. Quite the contrary, the cost of ObamaCare is going to be high, the disruption to businesses and states (during it’s implementation) large and, I believe, it will create an even larger drag on the economy than the ‘uncertainty’ prior to the court decision.
2) The news from Europe appears to be just like many of their previous announcements—designed more for giving investors what they want to hear as opposed to actually solving the problem. The proposed solution is unlikely to get approved, anyway, because it requires ratification by each member state and it is unlikely that Germany will pass it. But, hey, look at the bounce in equities since then… or rather, the now fading bounce.
3) The bottom line is that there is a large global debt problem that is resulting in slowing global growth. The markets are like a balloon with a leak in it that someone keeps blowing more air into it in hopes that the hole will eventually close. Instead, the hole keeps getting bigger. At some point, it is going to be very hard to keep the balloon inflated at all.
4) Lastly, we have seen that the greater the recent troubles in Europe and around the world, the better the US Dollar and Treasury Bonds do. People around the world realize that, even with its flaws, the US Dollar is still the safest currency in the world.
For these reasons, as a wealth manager specializing in working with retired investors, I will continue to have significant amounts of client portfolios invested in lower-volatility, conservative investments.
Jeff Voudrie and Common Sense Advisors do not offer investment advice via this medium. Under no circumstance whatsoever do these postings, opinions, charts, or any other information represent a recommendation or personalized investment, tax, or financial planning advice.
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Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of his employer or any other person or entity.