A Financial Reflection Since May 1st, 2012

From May 1^st, 2012 through May 17^th, 2012 the Dow Jones Industrial Average has dropped by over 800 points.  Fears of Greece departing from the Euro as well as concerns about our nation’s unemployed are taking center stage. 

Most experts agree that the likely hood of Greece defaulting from the Euro is very high.  The general consensus is that default could be sooner than later.  The question is: what is to become of Spain if and when Greece departs?  Would other countries follow suit?  For now, these questions are being put on the back burner.

Unfortunately, domestic corporate earnings with better than expected results has been overshadowed by a struggling Euro; causing the market to plummet.  Even though corporations are posting positive growth, companies are still holding off on aggressive expansion; keeping unemployment lingering above 8%.  With our short term solutions involving Federal stimulus (Bernanke’s watchful eye) waiting on the sidelines, this trend is likely to continue. 

Until our long term goals are adequately addressed, companies will remain cautious and are likely to hold off on any new hiring.   This will cause unemployment to hold steady.   Lending rates will likely continue to decline, and volatility will continue to be present. 

This is good news for the housing industry though.  Just recently, the 30 year fixed mortgage fell to an all time new low.  Today, a new mortgage loan can be cheaper than it’s ever been.  Hopefully these new low rates will spur some sort of growth in our housing sector.  Whether or not banks can accommodate the demand for new homebuyers remains to be seen.   Mortgage rates should continue on this path, especially with the Fed’s promise to hold interest rates down through 2014. 

Bottom line, we are nowhere near the end of the tunnel.  Volatility will continue to be present, which will disrupt long term financial goals.  Concepts such as annual reset will allow you to bypass the volatility while embracing a moderate return.  Today, trillions of dollars have been spent in order to offset this recession, yet volatility continues.  The longer volatility is present, the further away your financial goals become.