On January 4th, 2010, I made the following prediction: I am looking for a decline in the S&P 500 index from the 1,131 level today to around 1,100. I don’t see a substantial decline in the index, but the market overall seems to be slowing down. I do not see great holiday revenues coming from many retailers, and believe we will hear Q4 corporate profits, from various sectors, are mediocre at best.
Today, January 29th, the S & P 500 Index is at 1085.18, and I am now recommending you start putting cash to work by buying stocks. The markets are down over 4% since January 4th, 2010, therefore, I am not predicting the markets to fall very far from this level, if at all, in the next few months. After reviewing recent earnings reports from some of the largest companies in the world, it is clear business demand is increasing, yet at a slow pace.
Several companies have showed strong profits from a year ago, however, that in itself is not a good measurement of how our economy is right now. Cautious outlooks for 2010 from several companies tells me our economy is doing better than it was in 09′, but we still need to realize in 09′ the government provided plenty of stimulus money, and 2010 may not benefit from those handouts. Federal Funds rate should remain low for the next 3-6 months, providing cheap money to banks. We have to wait to see how much lending the banks are willing to do, provided the increase in security measures the Treasury Department has imposed on those banks.
In summary, the market is down 4% in the past few weeks, now is a good time to start buying stocks using the dollar cost averaging strategy.