The psychological urge to move on is ingrained in the American character. As investors, this compulsion does us no favors when the stock market is hot and we chase the top performers, or when it’s plunging and we flee longstanding holdings.
China is headed for the dumper. So goes the negative chorus on the world’s second largest economy. Slowing growth, horrible air pollution, a real estate bubble – the reasons given for the country’s demise are numerous. But despite China’s woes, its prospects remain bright.
Since the financial crisis, when both stocks and bond prices took a pounding, the normal pattern returned: Stocks zig when bonds zag. That usually meant that trouble in the world tanked stocks and buoyed bonds, particularly Treasuries. Nowadays, though, stocks and bonds may end up trading places.
Although the stock market hasn’t advanced much this year and is ebbing lately, it still has hit new highs. Considering that economic news is up and down, why is that? Let’s take a simple quiz and answer the following multiple-choice question.
Fortunes change for mutual funds, even the best ones. That’s true for funds that seem to be alike. Subtle differences, however, can spell a noteworthy divergence in performance. A case in point is the contrast between good funds from Dimensional Fund Advisors and Vanguard Investments.
Rising rates and economic weakness is a recipe for market slumps. The likelihood, though, is that the pain will be short-lived, as it has been in the recent past.
The Federal Reserve is done with its stimulus program, which buoyed the U.S. stock market. But elsewhere in the world, central banks are just getting started. And that should have a salutary spillover for American stocks.
The two biggest asset classes, stocks and bonds, won’t deliver much for investors. So says one of the sharpest financial minds of our time.
Wishful thinking now grips the investment world. So many people believe that growth will continue bountifully, which has brought us rising stock markets worldwide. This is a dangerous myth.
What can a rock ’n’ roll classic teach us about investing? Plenty, if the turbulence of rising interest rates hits Wall Street. Here are possible effects on some market sectors and suggestions for your best countermoves, especially in terms of bonds.