Tell me what you're going to do, and I can plan for it. If it's something that is going to have a negative effect, I won't necessarily like it, but at least I know that I can plan for it. If you tell me that you're going to do "something", but won't elaborate, then you make me nervous.
And that's what occurred this week. On Tuesday Timothy Geithner, the new Treasury Secretary, gave a rather lengthy speech in which he essentially said.... nothing. The outcome of his speech was a roughly 4% drop in the market. I believe it would have been better if he hadn't given a speech at all.
We've also got this stimulus package that got voted on today that cannot help but be laden with pork. The last report I heard stated that it was over 1,000 pages long, spends close to $800 billion, and was not delivered to those voting on it until midnight last night. It will be "interesting" to see what all is in it. It's a shame that no one had time to read the thing before voting on it!
We need a stimulus package, but I don't have high hopes for the one they voted on today. I fully expect that the economy will recover, don't get me wrong. But I fear the spending that is likely built into this bill (I obviously haven't read it yet!). This spending must be paid for somehow, and it will end up getting paid for by you, me, our kids, grandkids, and possibly even their grandkids (a bit of hyperbole here, but you get the point).
The economy showed some signs of life, with an unexpected pickup in retail sales last month. I wouldn't get too excited about that though - one month's numbers do not a trend foretell. I expect that unemployment (currently at 7.6%) will continue to rise for a while. Things may well feel worse than they do now, and the general mood may become even more pessimistic. That should be expected as we head toward an eventual recovery.
Once the mood has begun to change, it will likely be too late to begin buying stocks. The market generally turns in advance of the economic recovery, and as such we believe that investors should be increasing exposure to equities. It may not be comfortable doing so, as we expect that the volatility will continue for some time, but this may prove to be the best opportunity to invest in decades.
