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The Lindsey Report – March 2013


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Article By Cleaton M. Lindsey III

In March, the S&P 500 finally eclipsed the 2007 high point, setting a new closing high of 1569 and on April 2nd, it closed at 1570, setting another high (Reuters).  For the most part, it has been trading in a fairly narrow range the past month (mostly between 1540 and 1570).

With equities trending near their highs, investors may want to take this opportunity to review their portfolios.  It can be an opportune time to rebalance a portfolio that has become to stock heavy or to lock in some gains.  Not that we don’t hope the market continues to drift higher, but if you are planning to take a withdrawal this year for an RMD (Required Minimum Distribution) or for other planned expenses (car, vacation, etc…), you might consider moving some or all of that amount into cash at this time.

I’m not suggesting that valuations are not appropriate or reasonable at their current levels, but we all know that even in bull market’s, there are corrections along the way.  While no one knows when it will happen or from what level it may start, it is certainly reasonable to expect that we could experience one in the not too distant future.

Generally, I believe moderate corrections are healthy, as they can help establish a base for future rallies.  Consider this, in the last three years the S&P 500 has made a strong move, but there have been several corrections along the way.  In 2010 there was one for 16%, in 2011 there was one for 18% and in 2012 there were two: a 9% and 7% correction (MSN Money).  Therefore, with valuations at their current levels, this may be an opportune time to make some adjustments.

Regarding the economy, I recently read a Bloomberg article titled: Sales of New Houses in U.S. Cap Best Two Months Since 2008.  I continue to believe an improving housing market is a key ingredient for a stronger economy.  Not only does a healthy housing market directly stimulate the economy.  Indirectly, rising prices creates wealth and should improve consumer confidence.  The article reported that prices in 20 major cities increased by 8.1% over the 12-month period, ending in January.

A few days after this article came out, Jim Kramer was discussing rising home prices on CNBC.  He noted that even though he was not selling his house, rising prices just made him “feel better”.  His feelings are likely shared by many: I feel better knowing my home value has finally started going up!

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual.  To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly. 

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