Several fundamental economic indicators would point to a stock market heading toward bear territory or at least a situation where stocks will not gain very much at all.
1. High unemployment.
2. The Fed interest rates are already around zero and the economy is slow.
3. Housing starts and sales are not going anywhere.
4. A deadlocked Congress where money is not being spent to create jobs.
5. Shortfalls in IRS collections caused by a lot of people who are not working.
6. Foreign bad news because the world is now a global economy.
7. The summer and fall seasons are especially susceptible to market drops.
If you see any or all of the above signs, it might be a good idea to sit on the sidelines until conditions improve. Another possibility is to buy bond funds like JNK and RCS which pay around 8% or better annually, and you get a portion of the dividend each month.
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