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May 8, 2013


May 8, 2013 Perspective

May 8, 2013 by Lesjak Planning

On Tuesday, the Dow Jones Industrials eclipsed the 15,000 level for the very first time. It has been 1,044 trading days since the market bottomed at 7,000 in March of 2009. This four year climb was accomplished much quicker than the last climb from Dow 7,000 to 14,000 which occurred over 2,621 trading days from 1997 to 2007.

As we read the accounts of this new high in the print media, we must look back to last month’s commentary and the graphic that accompanied it (April 11, 20013 Perspective). The papers report that this market rise over the past four years has investors starting to find it irresistible. Those investors that have played the worry game and sat on the sidelines or bought into the so-called safety of bonds are starting to question their actions. So, after a four year rally that has brought gains of 130% and prices to new all-time highs, investors are thinking of finally getting on board. History repeats itself like clockwork!

This is why for the past 6-12 months, we and the analysts we follow, have felt that any market pullback would be short and shallow. There are tremendous amounts of cash on the sidelines looking at this remarkable market run that will eventually be put into equities as investors throw in the towel and jump on. In the past these surrenders to the market pressure have caused concern that a top was being formed, but in this case, the sheer volume of cash yet to be invested may provide much more room to grow before a top is reached.

When we get the significant moves higher in the markets as we have experienced, it is important to not vary from your desired initial allocation of assets over a balanced portfolio. Profits should be taken from those sectors that have outperformed and are now over weighted in your portfolio and re-allocated in the other sectors to be sure you stay balanced and at the overall risk level that fits your need. Don‘t let greed drive decisions that will put you at unnecessary risk.

Remember, trying to time market directions requires one to be right twice: When to get out and then when to get back in. Those just getting back in now were most likely wrong on their timing, getting out in 2008-2009, and missing out on this historical four year rebound.

By technical market statistics, most stocks today are fairly valued, unlike being overvalued in 2007.

Also, the Federal Reserve has helped fuel this move in the market by keeping rates historically low for savers which has forced money into the stock market in search of nominal returns.

As this market continues to surprise the masses, it confirms once again the fact of market cycles. Experiencing these cycles multiple times over your investing lifetime should help when the news turns bleak during the next downturn and emotions become frayed.

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Lesjak Planning

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