Bermuda Shorts
As everyone digging out from "The Blizzard of 2016" will attest, the last thing you need right now is a pair of Bermuda shorts. In my community, according to Accuweather the snowfall accumulated to about 26 inches, with drifts of over four feet in my front yard. The high winds created lovely Calder-like monuments in interesting locations- my neighbor has a roof creation that could be on display at the Rodin Museum. What lesson should be discussed in light of this? There is no better time to remind you that the best time to buy Bermuda Shorts is in the dead of winter.
Why am I reminding you of this old adage ? The U.S stock market has been suffering through a significant decline and global markets have been worse. According to a recent Merrill Lynch report, 35 out of 45 major country indexes have fallen 20% or more. This bout of investor angst cannot be ignored. But as noted economist Paul Samuelson pointed out: "The stock market has predicted nine of the last five recessions."
Another report I reviewed last week provided data on "recessionary bear markets vs. nonrecessionary bear markets." The study indicates exactly what you think it should: recessions cause bigger average declines than bear markets without recession. Interestingly, the duration of these declines was similar.
Raymond James economist Dr. Scott Brown believes that global economic data does not justify market weakness. I think he is right. But last week he did warn us: "The recent weakness in the price of oil has reflected supply and demand issues, but global investors have generally looked to oil as a gauge of the strength in the world economy." Dr. Brown further cautioned that emerging market weakness could end up being a self-fulfilling prophecy.
And to lighten up the tenor of this piece, I included a quote from a former Chairman of the Federal Reserve.
"My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded."
Ben Bernanke
Past performance may not be indicative of future results. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets.
