President Barack Obama may have received a self-described shellacking in the mid-terms but when it comes to the markets, certified financial planner Jacob Gold says the halfway point of Mr. Obama's presidency could be a turning point.
"Historically the S&P 500, the last 17 times we've had a third year in the four-year term, the last 17 times the markets have averaged up 22% per year."
The last time we saw a negative return in the markets during the third year of a presidential term FDR was in office and Gold says that alone is good news for those who have parked retirement and other savings in the safety, but low returns of cash and money market funds.
"So this is not an indicator that you want to put all in the market and go bull on it, but nonetheless we have a little wind at our back instead of straight at our face as we've had over the last few years. Now is the time to re-evaluate things. Now is the time to look back at the last few years and see what opportunities were lost, where they stand today, and where they want to go in the future."
Part of that is determining how much money you can invest in stocks or other equities. Gold says that if you need the money in the next three years, stay out, because it will be a bumpy ride.
“Even though the year 2011 could be a positive year, that doesn't mean we won't have a couple of months where investors get scared and if they time things wrong, they could potentially lose double digit." He does see two areas investors should look at, with caution: "The first being emerging markets. Economies like China, India and Brazil have a lot of positive momentum but that momentum can change overnight.” Another area that has a lot of opportunity but still a lot of risk is in the small and mid-cap arena. As these Fortune 500 companies start to deploy some of that money on their balance sheet they are going to look at their smaller competitors and they are going to want to buy out those smaller competitors. So mergers and acquisitions will be on the rise but on the same side because they are smaller companies the volatility on a day-to-day basis is much greater than that of a blue chip stock.
There is always risk and reward and you have to balance those." Gold says the best way to balance is to diversify.
Do not put all your eggs in one basket and while he says we still face some hurdles, the winds of history should at least hold out some hope. "Having businesses be optimistic, knowing that it is a third year, in a four-year-term of the presidential cycle, the odds are somewhat in our favor to see things in a rosier view than we have had the last few years.”
You can find out more about Jacob Gold at jacobgold.com.
