Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Sunday, February 6, 2011

Market Back Over 12,000 --- Time to Relax?

With the Dow Jones Industrial Average now over 12,000 and many talking about continued recovery, is it time to take a breather, relax and quit worrying about the economy and your children and grandchildren’s future?

We think not. While we are as hopeful as everyone else that the world economy will soon recover and the U.S. can get its arm around its debt, there are so many uncertainties, we think it’s best to continue to plan for tough times ahead.

We’ve written many times recently of the continued downward trend in home prices and the continuation of foreclosures at a rate higher than last year. Employers remain hesitant to hire and we’re a long way from getting our arms around our rising debt.

The unrest in the Middle East that surfaced this past week could have huge implications for the world economy. Gasoline prices were already projected to hit $4.00 a gallon this summer, prior to the crisis in Egypt. Commodity prices are on a rampage.

An article in the Wall Street Journal this last week titled “Emerging-World Fear: Inflation” by Tom Lauricella and Alex Frangos (Monday, January 31st, 2011) discusses the problem with rising inflation in emerging market countries. In the article, the authors quoted Michael Shaoul of Oscar Gruss & Son who wrote in a research note: We currently view overheating within the emerging-market complex as the greatest macro peril facing the global economy.”

Interest rates here in the U.S. have been at an all-time low for some time now and at some point will rise, along with inflation. Municipalities and state governments, with their rocky finances could likely see higher interest rates sooner, rather than later. And, it’s hard to imagine that we won’t see increased taxes in the not-too-distant future, as the government at all levels, tries to address the debt problem.

We are generally optimistic in nature. But, while there are some hopeful signs of an improving economy, there is still a lot to be concerned with. We believe it prudent to continue to focus on strengthening your balance sheet. Pay off credit card debt; pay down your mortgage and any other loans; cut discretionary spending and increase savings. There may still be some rough roads ahead.


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