Recent newspaper headlines tell us that the world economy is the Titanic heading for an inevitable collision with an iceberg and that our captains (U.S. policymakers) are asleep at the helm. Growing concern that Europe’s debt crisis will spread and the failure of American policymakers to reach an agreement to reduce the federal budget led the S&P 500 4.7% lower two weeks ago to its worst Thanksgiving-week loss since 1932 (Bloomberg). Then the first week of December, the S&P 500 rallied 7.4%, while the Russell 2000 Index of small-cap stocks soared 10.34% (Louis Navellier Marketmail, December 5, 2011). As the seas ebb and flow, so does investor sentiment, alternating from despair one week to jubilation the next. Headlines foretell the sinking of America’s economic ship due to a worrisome lack of leadership in Washington and Europe, the likelihood of a “double-dip” recession and the imminent economic doom in Greece, Portugal, Spain and Italy.
While investors face real problems in these turbulent seas, we believe that the global and U.S. economy has more in common with a sailboat than the ill-fated Titanic. Navigation matters, but ultimately, both headwinds and tailwinds can and do affect our sailboat’s voyage. While icebergs and obstacles certainly exist, we can make course corrections to avoid them or lessen their impact and we make small course corrections that keep us headed in the right direction and allow us to turn our sails to catch the wind.
Read remainder of article.Investment insights Dec 2011
