Too Much Pessimism?

Sunny Days Ahead?

Pessimism is pervasive. Many people believe the economic future is bleak.

Perversely, investment strategist Richard Bernstein believes that attitude augurs well for future stock market performance.

Historically, Bull markets --- great increases in stock prices -- have often begun in difficult times when people are most discouraged and predate economic recoveries. Bernstein, formerly the top strategist for Merrill Lynch, believes that the current widespread fears and disgust are sowing the seeds for the greatest bull market of his lifetime.

Speaking at an investment conference in Boston recently, Bernstein said he sees signs of improvement in the economy. For one, he said, total debt -- including government, mortgage, consumer and business debt -- has dropped at the fastest pace in modern U.S. history.

Housing is beginning to recover as is the job market. Stock market valuations, particularly compared to other asset classes such as bonds and commodities, are reasonable.

If Bernstein is correct, the stock market could potentially soar sometime in the next few years and the economy will follow. Prosperity may not be just around the corner but don't discount the possibility that good times lie ahead.

Approaching the Cliff

No Harm, No Foul

A current pressing topic for investors is what, if anything, to do about the "Fiscal Cliff."

I learned long ago that taking actions based on expectations about what Congress will do or even has done is often a losing proposition. Congress routinely acts in ways that puzzle even its top leaders. Legislation frequently is so complex that its true impact isn't apparent for years.

Nonetheless, there are times, as at present, when thinking about possible Congressional action could prompt one to take actions that will be beneficial  regardless of what Congress does. As always, taking action in your financial affairs requires analysis of your unique circumstances. You should not act because of the hysterical guidance from pundits.

When Congress last faced this type of situation, in the debt ceiling negotiations last year, the outcome and the market reaction surprised nearly everyone.  For now, make sure that if you take action, you're doing no harm to your long-term interests regardless of what emerges from Capitol Hill.

If what you plan results in improved portfolio diversification, better investments or a more thoughtful approach to your financial future, go ahead. But don't act impulsively and undo long-held plans only because of this short-term  struggle.