It was 1970 when folksinger Joni Mitchell wrote about going "round and round and round in the circle game." That image seems to fit today's stock market. Every day seems to bring some kind of big news that threatens to send the markets into a tailspin or offers the hope of a huge rally. And yet, after all the ups and downs, it ends up more or less where it started.
Dividends always have been a primary part of the investment philosophy of Peachtree Investment Partners. But in markets such as we are currently experiencing -- where stocks go wildly up and down but end up essentially flat -- dividends take on particular importance.
The English poet John Donne famously said, "No man is an island." The same is true of countries and their economies. And that accounts for much of the volatility in U.S. markets over the last several months.
Have you ever been driving along the highway and seen another driver constantly changing lanes and cutting cars off -- putting himself and other drivers at risk -- only to wind up no farther ahead than he would have been if he had stayed where he was? The markets right now are a little like that, as some investors are nervously switching their investment approach.
Especially since the Dow Jones Industrial Average has been flirting with and then finally topped the 17,000 mark, the doom-sayers have been out in force. Like Chicken Little in the well-known children's story, they are certain that the sky is falling on the market recovery.
The performance of the financial markets seems to be tied to the outcome of an ongoing game of tug of war between a couple of powerful forces.
On one side are increasing interest rates. After years of keeping interest rates low to stimulate spending -– and therefore economic growth -- the Federal Reserve has made clear that it intends to start increasing rates slowly until they are back at more normal levels.
The 113th Congress so far is the least productive in history. Paralyzed by gridlock, Congress sent a record low number of bills to the president for his signature and instead spent endless amounts of time on pointless debates; for example, the House more than 40 times voted to dismantle the Affordable Care Act, although such a move was doomed in the Senate.
Regardless of which side you are on, you have to agree that our elected representatives in Washington could mess up a two-car funeral. As of this writing, they are engaged in an increasingly serious game of chicken that already has shut down large parts of the government and is threatening -- for the first time ever -- to fail to raise the debt ceiling to allow the U.S. to make the payments on loans and other government spending that these same elected representatives earlier authorized.
Observers of the financial markets in the last month or so must have felt a little like Alice in "Through the Looking-Glass" -- everything seems like the reverse of what it should be. More people find jobs? The markets fall. More people out of work? The markets rise.
As chairman of the Federal Reserve, Ben Bernanke functions rather like a physician to the nation's economy. And by late 2008, his patient was on life support. The stock market was in a free fall, unemployment was shooting up, and the housing bubble had burst, taking with it a lot of the net worth of millions of ordinary Americans.
Great hitters in baseball have an ability to block out everything except the ball coming out of the pitcher's hand. They don't hear the crowd, they don't see the fielders, they don't focus on anything but the ball. That's why they are successful.
Many investors seem to be a little skittish these days. Perhaps it is the fact that, after a very strong performance in the third quarter, the market has leveled out somewhat. Perhaps it is concern about the results of the upcoming election. Perhaps it is worries about political and economic events abroad.
