Is The Stock Market Prescient?

That is, is it prophetic, predictive, far-sighted, intuitive? Probably not so much. Otherwise we wouldn’t encounter teeth-loosening crashes from time to time.

The last time was about 7 years ago when lots of folks suffered heavy losses that chased them from the market for years and upset their retirement plans. We will undoubtedly experience market crashes in the future. We know not when, but there are signs to watch for that tell us trouble is ahead.

1) When conversations center on stocks rather than sports or the latest iPhone.

2) When those disenfranchised in the last crash return to “play the market” again.

3) When stocks reach historically lofty prices because “it’s different this time”.

We are not experiencing these red flags yet although some securities are very pricey. It is much easier to find an overpriced stock today than one which is undervalued. Price/earnings ratios and other statistics have moved to the higher end of the scale. We might conclude that the market, if in fact it is prescient, is telling us that good economic times are just ahead. We hope so, but to date, the economic recovery has been disappointing while stock prices are ebullient.

Remember when you review your performance and your returns that our first objective is the preservation of your capital. Our second objective is a fair return on your assets over time.

One of our clients brought in her tax return (not prepared by us), and we found a huge error. Please feel free to have us review your return (no cost) if you feel it is not correct. It would be good if you provide us with a copy, if we do not prepare it, so we can be abreast of your tax situation.

If you are nearing retirement or are offered an early retirement package, please call us before you commit. We enjoy helping our clients plan for a comfortable retirement. Also call us on long-term care insurance, life and disability insurance, college loans, gifting to your heirs and all things financial. These conversations are included in your fee.

Very Truly Yours,

Michael F. Cantlon

Thomas E. Guyett

Robert T. Gephart

“Read more history and fewer forecasts”