What's on Tap for the Market?
I am not talking about beer...
the long July 4th holiday, many of you may be thinking I was
speaking of those drinks you enjoyed this weekend as you
grilled out with friends and family.
However, I am talking about the tap at the gas pump, and the
tap or I should say spigot coming out of Washington.
We just finished up the first half of they year, so I want
to give you a "heads" up what is to come for the remainder of
2011. The year is really taking shape as I expected.
The next week or two will give us some insight if we can move
higher or if it works out like I suspect, we will retest these
lows one more time prior to a final move higher for the year.
We have some forces for the next six months that
will move the market higher, but please be cautious
after this next run up. A few things I would like to
share with you that will move the markets going forward.
The first item is
gas. Not the politicians blowing hot air, but the kind you
put in your car. This reprieve from higher gas prices needs to
stick around to create a stimulus for the average consumer.
From the 2nd quarter of 2010 to the second quarter of 2011,
the increase in gas prices sucked nearly $120 billion from the
consumer in just the second quarter alone. It is projected to
now drop from $30-$50 billion per quarter with the recent
decrease in prices. However, it is still much higher than the
second quarter of 2010. This will continue to drain John and
The second item is
quantitative easing #3. Yes, I said it. This economy is
not running correctly except for the government printing
presses. I actually think they will turn down a bit, but
expect the government to give a tax holiday to corporate
America and with the projected $1 Trillion dollars or more
overseas, this will create the same effect as another stimulus
right here in the USA. This is the best kind of stimulus we
could ask for.
The third item
which many of you will not want to hear has to do with the
debt ceiling. If the Republicans and Democrats come to
terms and cut federal spending (which they need to), it will
cause another downturn in corporate earnings and yes the
market will falter sometime in 2012. The federal cuts will
eventually offset any corporate spending if they are great
My personal opinion is this will
not happen, they will announce cuts, not live up to them, and
just kill the US dollar to pay back debt easier. You can also
read this as the largest tax increase in the next five to
seven years without actually having a tax increase. This 2012
downturn will then be temporary.
So for the rest of the year, the
markets will tend to move higher and then we may have some
adjustment in 2012. Obviously, I will give you more
insight to this as we move closer and things become more
apparent as to how they will play out.
if you are looking at your own investments / IRA and want to
adjust your asset allocation OR your risk tolerance has
changed and you want to become less or more aggressive in your
portfolio, I can perform a Complimentary Portfolio Analysis.
Give me a call or email me if you're interested.
If you have any questions about
investing, tax or accounting, please give us a call at 714-619-0667.
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Regards, Monica Rebella, CPA
President, Rebella Accountancy