Sunday, January 10, 2010

Is The Rally In Stocks Over?

There seems to be a lot of talk going around that the rally in stocks is over. On the other side of the coin, some are saying we'll see a continued upward trend for the first half of this year.

Personally I think we'll see an erratic movement in stocks with a lot of ups and downs, with an overall upward trend. For those who say the market can't go higher after last years gains, I would remind them the Dow was over 12,000 not all so long ago. Recently the Dow closed at 10, 618, so why would it be so hard to believe in a continued rally?

Job losses have slowed, although there are a lot of people still out of work. I was one of those people until October of last year. I had been unemployed since the first of January and finally went back to work the middle of October. Granted it is a much lower paying job, but it's nice to have a job again just the same. I think we'll see more improvement in the job markets this year, especially with companies who overly reduced work forces having to call workers back and for companies who benefit from the Federal Governments job creation incentives. When the job market improves the rest of the economy will follow suit.

One really good thing to come out of the "Great Recession" is the Americans decrease in credit card spending and increased personal savings. I only hope the benefits that come from this are not outweighed by heavy increases in deficit spending by the Democratic congress and the Obama administration. All this spending has already led to increased taxes and more are sure to come. Increased taxation is bad for the economy and bad for businesses and jobs creation. I was surprised to hear California's Republican Governor proposing a cut in corporate tax breaks at a time when California is facing such severe budget shortfalls. Many corporations have already left California for more tax friendly states and further cuts in tax incentives will only lead to more companies relocating out of state at a time when they really need to be more friendly towards business and jobs creation. I'm starting to wonder if Mr. Schwartznegger is aligning himself more with the Democratic agenda rather than the Republican party?

When all is said and done, we have to be prepared for another difficult year in the markets and be very selective when it comes to picking stocks for our investment portfolios. Only time will tell if the rally will continue, but doing your homework before investing can help alleviate downside risks. True investors make money whether the market is up or down, so our main goal is to educate ourselves as much as possible and become "true investors" and avoid random trading in and out of the stock market.

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