Day 123: Goldilocks & the Bears
The Mother's Little Helper portfolio was down -0.10% today for a loss of -$684.97. Overall gain to date: +$110,724.96 (+18.96%). According to CNN Money the S&P 500 is up +6.49% Year To Date (http://money.cnn.com/data/markets/sandp/).
Are we in a 'Goldilocks' economy? Are we in a 'Goldilocks' stock market?
I really don't have an answer to this question, but the conditions seem to all be in place. Does it matter? No not really because it's always hard to know where we are in a normal cycle or if the Goldilocks phase we're in is in a peak or growth stage. The market Bears will always say, "we're poised for a pull-back, or a correction or a recession. Calamity is always just around the corner". These negative positions are not really even predictions, all three forms of market down turns are simply regular occurrences in the normal cycles of the market.
In a 'Goldilocks Economy' we have a domestic economy that is not-to-hot and not-too-cold. Too hot causes inflation at levels we don't want, too cold causes a recession. I haven't found anyone that has defined the exact levels at which a Goldilocks economy occurs, but it's generally seen as a condition when we have low unemployment, increasing prices in stocks and real estate, low interest rates and steady GDP growth with historically low inflation. One of the most import aspects of a Goldilocks Economy is that it's the perfect environment for investing for all investors. Whether you're putting a few dollars into your 401K, a college fund or your a billionaire hedge fund investor, 'Goldilocks' is the perfect environment for investment because stocks can be expected to do well, companies tend to grow (earnings, margins and hiring), and as long as inflation remains low bonds will perform well or at least hold their value. If you're an income investor or you're relying on bonds for retirement income this is important for you.
Goldilocks economies are really just a temporary state as the overall economy passes through its normal five phases of growth & expansion, peak, recession & contraction, trough and recovery. Typically Goldilocks economy states occur during the growth and/or recovery phases. The trick is trying to determine where we're at now and which Goldilocks state we are in.
Goldilocks stock markets are phases in the normal where cycles when investors are mostly avoiding losses but not making gain so large that the market reaches a 'bubble' condition.
We had several companies report earnings with upside earnings surprises, Exxon Mobile and Chevron were particular standouts.
Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell share withing the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.