Bob Brinker’s Stock Market Outlook
Caller: Given the problems with the huge national debt and foreign countries not wanting to purchase our stock, where do you think the stock market is going forward?
Bob said the stock market is not dependent on foreign purchases which are a negligible factor for stock prices. What's important for the U.S. stock market is corporate earnings and the U.S. economy going forward. People looking in the past and don't know why the market is going up. They don't understand why the S&P 500 is already above 1400 and the Dow above 13,000. The stock market is looking into an economic recovery later this year, and it is looking at rising corporate earnings going into 2009. That is what smart investors are looking at.
David Korn: Bob's response to this call shows his bullish outlook for stocks. The next caller is even more evidence of Bob's confidence of that view.
Caller: This 59-year old caller has a portfolio of over $800,000, and has adopted a very aggressive position in terms of her asset allocation with 99% in stocks. She practically apologized to Bob for taking that kind of risk.
Bob said she did not need to apologize for being a fully invested position because he thinks the people in cash look more foolish every day. The caller said she has only lost 4% this year to which Bob said when you look at the gains over the last 20 years, 4% is nothing. The caller said she agrees with Bob that the stock market is going to be positive going forward this year. They then had a virtual hug (as I imagined it anyhow).
The caller said she wanted to switch from the retirement plan she was with over to Vanguard.
Bob said to find out how long it takes to get the money transferred. Ideally, it could be done in one day, but if you find out it takes many weeks, the market could be at a different level by then and that is potentially a situation you won't like.
David Korn: The fact that Bob didn't even balk at the fact that this caller was pretty much 100% invested in stocks, even at her age, shows just how strong he feels that the stock market is moving higher. Bob's comments about getting the money transferred over to another fund also shows that he thinks the potential exists for the market to continue its rise even in the coming weeks. Of course, Bob isn't always right about the short term (or long term for that matter), so if the market corrects again a delay in the transfer could actually be beneficial. We have had quite a few summer-time "corrections" in recent years, so it certainly is not out of the range of possibilities. I think a lot depends on how fast and furious this rally is.
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Excerpts:
- Our strategy paid off in handsomely this year. Our Aggressive Growth and Income Model Portfolio 1 produced an annual return of 9.52% for 2007. This portfolio handily beat the S&P 500 by almost double, despite only having 50% of the portfolio invested in equities.
- Our Moderate Growth and Income Model Portfolio 2 produced an annual return of 8.58% for 2007. This portfolio also handily beat the S&P 500, despite only having 29% of the portfolio invested in equities.
- Our Conservative Capital Preservation Model Portfolio 3 produced an annual return of 8.32% for 2007. Like our other two portfolios, this portfolio also handily beat the S&P 500, despite having no investments in stocks.
