Greece, oil, and other lubricants causing the market to slide

Now that it has finally reached 100 degrees in Texas, and the stock market is gyrating like a roller coaster, things are truly uncomfortable. On a dgflagaily basis for over a month now the news has spouted grim information, but which isn’t always grim when you take a closer look:

  • Greece – raise your hand if you are tired of hearing about Greece. For years now, since 2010, Greece has been a steady hum of angst that occasionally pops out and terrifies the markets. On Monday, the Greek stock market opened up for the first time in over a month was down 16%. However, manufacturing numbers for the Eurozone showed strength which means that, in spite of Greece, Europe can, and will, survive despite Greece’s missteps.
  • Oil – who knew that a year ago oil would be worth less than half of what it was then valued at? This is mostly bad for oil companies (about 10% of the S&P 500), but helps other industries like restaurants, retail, and airlines (about 30% of the S&P 500). And I don’t hear anyone complaining at the gas station.
  • China – not long ago, a lot of people were talking about China taking over the United States as they held a lot of our debt. However, much of China’s income comes from manufacturing, and their recently reported manufacturing numbers (which are hard to trust) were terrible, meaning they may be much worse than terrible. For this reason, and others, the good news is that the Fed may hold off a little longer in raising interest rates.
  • Apple – a huge bite (pun intended) has been taken out of this giant partly due to China’s slide. Last month, CEO Tim Cook said that China would be the company’s largest market. As stock prices are all about expectations, and the expectations are negative, this has made Apple pull back by nearly 15% from its high in April. This is not unprecedented, though, as Apple has had several pullbacks over the last 10 years. Ultimately, Apple’s balance sheet still appears to be strong. The take here is that this could be a buying opportunity, as long as it is part of a well-diversified portfolio.
  • The stock market – this is actually a symptom not a cause, but worth discussing as it has been volatile and therefore a source of conversation. First, some stats: in the last 12 days, the Dow is down 3%; it is also down 3% for the last 12 weeks; however, it is up over 6% for the last 12 months. And this is just this point in time; I could pick different dates and tell you whatever story you want to hear, but the bottom line is that the Dow Jones is one indicator composed of 30 stocks in the United States, and should not be your focus.

This hopefully reiterates to you the rationale in not betting on any one stock/industry/sector/country. Instead, invest prudently, taking the appropriate amount of risk that suits you, and keep a long-term perspective on your long-term money.

%d bloggers like this: