Market Melt-up?

by | Jul 1, 2011 | General

Investors with cash may be getting nervous

This week illustrates the dangers of getting too worked up about market corrections and also investing while reading headlines. Missing a week like this one is the most common reason for mediocre investment performance.

Our sources kept telling us that the market weakness since April was a correction and not the beginning of a bear market. We’re glad we listened. It is never easy to hang onto stocks when the news is as rotten as it has been this spring, but selling good companies because of Greece (or some other big-picture mess) is usually a mistake.

Weak economic numbers have also encouraged selling. Deciding whether the slowdown is temporary (Japan was probably the culprit) or long lasting, has been the major economic question of the last couple of months. The rally in the last four days of June suggests that the “temporary” theory is winning out. The second half of the year should be stronger as Japan recovers.

Our portfolios have performed well in the second quarter and for the year-to-date. US based growth companies have done the best so far this year, and lately International investments have begun to help. We have a list of new ideas and you’ll see some of them show up very soon.

We still think the year will turn out to be a decent one for stock investors, but there are reasons to be concerned about 2012. The challenge for us then will be to find income producing ideas that can withstand the inevitable rise in interest rates. Rising rates will make it harder for stocks to rise in value and impossible for straight bond investing to succeed. So our work will be cut out for us.  

Best regards,

Daniel A. Ogden

Dock Street Asset Management, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Dock Street Asset Management, Inc.

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