The waters of the financial world are not easily traversed these days. “We live in a very interesting and difficult-to-navigate market,” offers Steve Curry of Gilford Securities in Westhampton Beach. “There are a lot of factors at play—there is the political factor, there is the currency crisis and debt crisis, and there is a lot of uncertainty. At the same time, there are a lot of public companies that are doing quite well and are flush with cash.”
Dan’sHamptons.com: Even though the market is difficult to navigate, what do you tell somebody who isn’t in the market about getting in right now?
Steve Curry: I don’t mean to “whistle past the graveyard,” but some of my favorite indicators are flashing very green for intermediate term investors. Here is a few of them to put today’s prices into context:
According to Sam Stovall, the Chief Investment Strategist at S&P, since 1953, there have been 20 occurrences when the S&P 500 yielded more than 10 year T-Notes. This is currently the case as the dividend yield for the S&P 500 is 2.19% and the 10 year yield is 1.84%. The average 12 month return of the S&P 500 after these occurrences is roughly 20% (the most recent occurrence of this was in March 2009, and in the next 12 months, the S&P was up 20%).
This makes perfect sense. If you could borrow money for 10 years and use that money to buy the 500 largest domestic companies, and the dividends from those companies would more than pay for the costs of the loan, that would intuitively be a very good proposition.
Currently we live in a time where recent intelligence polls are showing Bearish sentiments increasing and Bullish sentiments decreasing. On October 5th, Bullish sentiment decreased to 34.4% from 37.6% in a US Investor’s Intelligence poll from Street Account. In the same poll Bearish sentiment increased to 45.2% from 40.9%.
Bearish above 45% is very high. To put it into context, 2 out of every 3 people are NOT bullish. That type of negative sentiment is where lows are made, not highs. When the sentiment gets to 55% bullish, the market will be a lot higher than where it is today, no matter how much lower we may go.
Furthermore, in a recent survey 40% of people from Gen Y state that they will NEVER invest in the stock market, and another 20% say it is unlikely that they will. Once again, very negative sentiment is associated with market lows, not highs.
These are all longer-term indicators, and I can’t help but think markets like this are where significant lows are made, especially in the Sept.-Oct. timeframe.
DH: On the political front, what has to happen to quell some of the uncertainty in the markets?
SC: Probably more clarity on who the Republican contender will be. Globally, it will be for the EU to get past the problems with Greece, and the capitalization of the big EU banks.
DH: Why use a financial advisor? Can’t people do it on their own today?
SC: We all have access to the same information these days, even the public. Really what’s important is how you interpret that information. Some people can do it themselves, but then there are others that really want help from a professional.
DH: Do you have a golden rule for people to follow when it comes to investing?
SC: Yes- “It is okay to be wrong. It is not okay to stay wrong.”
Gilford Securities is locates at 132 Main St # 11, Westhampton Beach, NY 11978-2627. For more financial information from Steve Curry and Gilford Securities, call (631) 288-5556.