12.17.2009 / Market Analysis Recap. Posting by Stephen Frantz, FNBO Chief Investment Officer.
With the equity and bond markets recently reaching new 52 week highs, we are becoming more concerned about the short-term sustainability of this rally. Although a cheaper dollar over the short run can help our economy by making the goods and services produced here in the U.S. cheaper for foreigners to purchase, at some point a significantly cheaper dollar becomes very counter-productive to growth.
There already appears to be some rhetoric out of the Obama Administration about a stronger dollar. At some point, interest rates are going to have to go higher to support this rhetoric. The question is, "Will this fragile recovery put together through unprecedented intervention have the ability to grow even in the face of higher rates?"
Our strategy into this short-term uncertainty continues to be to take some of our gains off the table, and rebalance back to target. For instance, if your long-term portfolio target for equities is 60%, and your portfolio is now at 67%, take 7% off the table and put that money into short-term bonds or cash.
With 5 and 10 year trailing numbers for equities still significantly below normal, we are quite constructive on the longer-term, particularly with international companies and large U.S. multi-nationals with a substantial amount of their revenue based overseas.
For more information on First National Bank's First Investment Group, visit www.firstnational.com and click on Planning & Investment Service or email firstfocusfunds@fnni.com.
What are your thoughts on equity and bond markets in 2010? Let us know what you think.
Comments are provided as general market commentary and should not be considered investment advice or predictive of any future market performance. Past performance does not guarantee future results.
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