IS 2010 THE YEAR TO BE CAUTIOUS WITH STOCKS?
If you bought into the stock market last year any time in 2009, chances are you have a winner to show for it. So many stocks went up that it was hard to pick a loser and some nice capital gains were made by many.
So far in 2010, things have also been on an upward trend and you don’t hear much discontent from those in the market right now. Does this mean that 2010 may also be another good year for those of us who have their money in stocks?
No one can ever know the future but it seems to me that this is a classic time to be cautious. How can stocks keep going up when the economy is still in a funk with very few signs of improvement? President Obama can pretend all day that things are going great but the people know better, especially the ones who are part of the 10% unemployment statistics.
The stock market is forward looking and the price of stocks are largely influenced by what investors see happening in the future. Right now it is hard to believe that too many people see the immediate future as being bright enough to keep the stock market going up in the relatively straight line that it is following now.
2010 sees many things happening in the political front that will impact taxpayers and businesses alike. If health care reform is passed, it means higher taxes for all of us at some future point. That will impact the amount of money people have to spend.
We must remember that most companies only make money when the public has discretionary income to spend. If people are not willing to part with their money, it impacts businesses in a cascading fashion. Will people really be confident enough in the 2010 economy to keep spending like they have? Can stocks possibly keep going up like they have been?
If you throw caution to the wind and buy stocks with no regard to the possible market downturns, you may end up with a sick feeling inside if things get worse economically. Stocks for dummies is not what you want to be feeling like at the end of 2010 so perhaps you might consider caution before you jump in with all your money.
