- What's Spooking Investors in the Stock Market Today
- Is the Soaring Stock Market Hiding a Darker Truth?
- Investment Safety Strategies: Eight Ways to Survive a Stock Market Crash
about stock markets
Usually, I just open the ones that happen to catch my eye. One was this recent headline from a MarketWatch.com bulletin that said, "Dow closes at highest level since December 2007."
My first thought was that the bulletin should have said: "Dow closes at highest level since December 2007 - despite faltering economy, stubborn unemployment, accelerating inflation and the highest level of uncertainty we've seen in decades."
I guess they couldn't fit all that into the subject line box.
My second thought was that Martin Hutchinson was right - again.
You see, for the last couple of years the administration in Washington and the so-called experts on Wall Street have repeatedly told us that inflation isn't a problem. They continue to insist that the bailout plans and easy-credit policies that were used to end the financial crisis have yet to ignite the rise in prices that you and I refer to as "inflation."
However, in the Aug. 21 Private Briefing, Martin completely dismissed this Pollyanna point of view. There is inflation, he said. In fact, it's staring us right in the face - as a soaring stock market.
According to Martin, the "Real Dow" should be much lower.
Another Stock Market Bubble
With so much economic uncertainty - read that to mean, so much "risk" - there's no way stocks should be zooming like this, Martin said. The fact that they are is proof of a cheap-money-fueled "asset bubble" - a form of inflation, he explained.
The Permanent Wealth Investor editor also predicted that U.S. stock prices would continue their advance - especially if the U.S. Federal Reserve appeared willing to add additional stimulus.
And as the MarketWatch.com bulletin illustrated, that's precisely what happened.
Here's the thing: Now that "QE Forever" has arrived, this inflationary surge is about to get much, much worse.
As an investor, that would be the biggest mistake you could make, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.
Although Fitz-Gerald is anticipating the whipsaw volatility to continue - and believes U.S. stocks are in for a particularly tough stretch - he's telling investors to stay invested if they can, stick with a solid game plan, and look for opportunities as they develop.
In fact, there are eight "mini-strategies" that investors can take that will let them navigate this near-term volatility, survive even a deep market downturn, and remain in the hunt for wealth-building, long-term investment profits.
"The key is remaining flexible and focused," notes Fitz-Gerald. "R emember, even the strongest trees bend in the wind."
A Hint of What's to ComeU.S. stocks started to skid in earnest Wednesday afternoon, after U.S. Federal Reserve policymakers announced an "Operation Twist" economic-stimulus strategy. The strategy wasn't well-received by investors, and the central bank may have exacerbated investor angst on a worldwide scale by stating that it was worried about global growth.
On Wednesday and Thursday the Dow Jones Industrial Average lost 675 points, to 10,733.83, a 5.91% drop. The Standard & Poor's 500 index fell 72.43 points, to 1,129.56, a 6.03% drop.
Last week's skid was just the latest episode in an erratic market that has seen the Dow zig-zag to a 16.21% loss from its peak of 12,810.54 on April 29. The sell-off spilled over into markets in Asia and Europe, and Fitz-Gerald says the pain is far from over.
He believes that key U.S. stock indices will re-test their lows of March 2009. If you've blotted those details out as a bad dream, we're talking about a stock-market bottom of 6,547.05 for the Dow and 676.53 for the S&P 500.
That put the Dow 7,617 points below its all-time high of 14,164 reached in October 2007 - a 53.78% drop. And the S&P's 56.8% decline knocked the index down 889 points from 1,565.15.
The Safety Strategies to Embrace NowWorries about a decline of that magnitude could make the market sidelines seem like alluring real estate. Instead of cashing out, though, Fitz-Gerald says investors should follow these eight guidelines, while keeping an eye on their long-term investment goals.