Our Current Market Outlook
The stock market is off to a dismal start in 2008. There has been some panic selling that we believe overstates the true underlying risks to the economy and financial markets. As discussed in our Economic and Social Outlook – January 2008 [PDF], we perceive that recession risks have risen to 50%, and are pursuing a more defensive strategy. While the market was perhaps due for a correction after five straight years of gains, we believe that conditions are likely to stabilize later in the year. Aggressive monetary policy (including a dramatic 0.75% cut in interest rates by the Federal Reserve on January 22nd), combined with upcoming fiscal stimulus efforts, will help the economy find a bottom, and the stock market generally anticipates these improvements by at least three to six months. From the perspective of long-term wealth building, patience is a great virtue in the face of volatile and difficult markets like these.