By Joe Smalley, Accredited Investment Fiduciary®

I was picking up a gift for my niece for her birthday last week and the Christmas displays are everywhere. It’s hard to believe it is already that time of year.

But I suppose we did just come out of election season, the results of which may have profound effects on investors. The Federal Reserve recently announced another round of Quantitative Easing, which should bolster asset prices. The Europeans are figuring out their own financial crisis, and it looks as if they will buy back bonds similar to what the Fed has done here, yet there are still protests in the streets. China's GDP is slowing, and it appears as if the malaise in Europe has even started to impact Germany. And perhaps most daunting, the US now faces the difficult task of addressing our own structural financial mess; the fiscal cliff is looming and Congress needs to come together to fix it.

Amid this background, Wall Street is pulling back sharply.

Confucius said, "May you live in interesting times." Well, I think now would qualify.

Historically, the fall is also when we see volatility in the stock market. With the S&P climbing the wall of worry all year, the index recently reached its highest point in three years. A pull back is certainly not unexpected – or unwarranted. Markets move in cycles.

So, are you ready?

In many of our models, we have reduced exposure to equities over the past few months. Some might be inclined to lock in gains for the year, and understandably so. There is an old saying on Wall Street, "No one ever went broke taking a profit."

But remember, there is another saying, "When there is blood in the streets, that is the time to buy." Or another even more famous quote, "Buy low, sell high."

So, take a look at your situation. See if you have some money that you want to add to your long term bucket. If so, get ready; we might just have a buying opportunity ahead. As always, give us a call if you have any questions. As long as it isn’t what to buy a 14 year old girl for her birthday.

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Disclosure:

All investments carry risk. No strategy can guarantee a profit or protect against a loss. All strategies should be used to help you accomplish your overall long term goals. Past performance is no guarantee of future results. Not all equities offer a dividend and dividends are not guaranteed. Real estate investments are subject to a high degree of risk because of general economic or local market conditions; changes in supply or demand; competing properties in an area; changes in interest rates; and changes in tax, real estate, environmental, or zoning laws and regulations. REIT units/shares fluctuate in value and may be redeemed for more or less than the original amount invested. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income. International investing involves risks not inherent with domestic investments, such as currency fluctuations, differences in accounting methods; foreign taxation; economic, political or financial instability; lack of timely or reliable information; or unfavorable political or legal developments. Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity. Investors must meet specific suitability standards and understand these investments are for a long-term investment horizon. Investors should note that diversification does not assure against market loss and that there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Barclays Capital government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Barclays Capital U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.  

Joseph D. Smalley is a financial advisor practicing at 2900 West Rd., Suite 222, East Lansing, MI 48823. He offers securities and advisory services as a registered representative of Commonwealth Financial Network®, a member firm of FINRA/SIPC and a Registered Investment Advisor. He can be reached at (517)487-4850 or at smalley@smalleyinvestments.com.