Stock Preacher

For some US stock analysts, yours truly among them, the start of the 1980’s Bull Market is a fitting historical precedent these days rather than the Great Depression era of the 30’s.

When comparing the the S&P 500’s chart in the advance since March 9, when it fell to its lowest level in 12 yrs, the recovery from a two year low set on Aug. 12, 1982 look very similar.

The S&P 500 rose 15% for all of 1982 and moved higher every year for the rest of the decade.

“Investor sentiment today is very similar to what I saw 27 yrs ago. ” said popular market observer, Paul A. Ebeling, Jr. AKA the Red Roadmaster of www.stockpreacher.com , I do not doubt economy’s ability to recover as real consumer and business confidence, retail sales, exports and other indicators point to a rebound, not depression, Ebeling said. The S&P 500 reached its August 1982 low during the second US recession in three years.

Technology is the only one of the S&P 500’s 10 broadest industry groups that has kept pace with its average move in nine other Bull Markets since 1962. Tech is the leader.

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Inflation Risk

Inflation is the artificial expansion of the quantity of money so that too much money is used in exchange for goods and services. To consumers, inflation shows up in the form of higher prices for good and services. To consumers, inflation show up the form of higher prices for good and services. Inflation risk is also referred to as purchasing power risk. This term just means that your money doesn’t buy as much as it used to. For example a dollar that bought you a sandwich in 1980 barely bought you a candy bar a few years later. For you, the investor, this risk means that the value of your investment may not keep up with inflation.

Say that you have money in a bank savings account currently earning four percent. This account has flexibility if the market interest rate goes up, the rate you earn in your account goes up. Your account is safe from both financial risk and interest rate risk. But what if inflation is running at 5 percent? At that point you are losing money.

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