Give credit where it’s due. Stocks have managed to navigate through July (often a choppy month) in remarkably smooth fashion. Following a flat Wednesday, the benchmark S&P 500 Index finished the month up more than 5% year-to-date.
Since 1946, the S&P has finished July in the black only 53.7% of the time — well below the 58.7% average for all months — so the market’s strength this July isn’t all that common, and something we have to respect.
Most likely, the uptrend will carry into August. In fact, it wouldn’t surprise me if the headline indices climbed even higher by year’s end.
Increasingly, though, it’s becoming apparent that an improving outlook for economic growth isn’t what’s propelling the advance. (Corporate earnings have basically stagnated for the past two years.) Instead, Johnny-come-lately money managers who feel they “must” own more stocks — or risk losing their jobs — are bidding up share prices.
Fortunately, we’re under no such pressure. We’ll buy when and where we see good long-term values. Otherwise, we’ll just sit on our wallets.
Sit on cash and earn zilch? Well, not exactly. A few Internet-based banks are offering savers yields of almost 1% on risk-free money market deposits, and I’m now adding another name to my recommended list: GE Capital Bank. GECB is paying 0.9% on money market accounts, with no minimum initial deposit. FDIC insures accounts up to $250,000 per depositor ($500,000 for joint accounts).
Of course, even at GE Capital’s rates (which far exceed the national average), you should treat money market deposits as a temporary parking place. Over the long run, you’ll be better served with stocks, bonds and other higher-return investments, purchased at appropriate prices.
But you can’t rush Mr. Market. He’ll hand you his bargains one by one.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.