The recent, much publicized “sequestration” can be problematic in some areas, says Prestonsburg financial adviser Rob Shepherd, but should not deter people from participating in the financial markets.
The sequester, a result of a failure between Congressional leaders and the Obama Administration to reach agreement on budgetary issues, will result in $85 billion in across-the-board government spending cuts this year. The $85 billion in cuts, while significant, amount to less than 2.5%of all government spending.
“We’re disappointed because many people will be hurt by these cuts. But things will not grind to a halt in this country,” says Shepherd, an Edward Jones financial adviser in Prestonsburg. “The markets tend not to like uncertainty, so investors should be prepared for some possible volatility in the weeks ahead, especially since sequestration was just one fight in the long-term battle over how to reduce the federal deficit. But there are still some very good reasons for people to continue investing for their long-term financial needs.”
Shepherd said the near-term investment environment might well be positive, due to a number of factors, including: healthy corporate earnings, a rebounding U.S. housing market, and expected improvements in Europe and China, two regions that have caused concern for investors.
According to Shepherd stocks are still reasonably priced, despite the big gains achieved in the current bull market, now almost four years old. Stocks in the S & P 500 index are trading at about 13.5 times their expected earnings, below the historical average of 15 times. However, Shepherd cautions, investors should keep in mind that past performance is not a guarantee of future results. An investment in stocks will fluctuate with changes in market conditions and may be worth more or less than the original investment when sold.
“These numbers are reasonable, based on historical ratios,” Shepherd said. “They show stocks are attractively valued, making this an opportunity for investors.”
Rob Shepherd says he is not altering the overall advice he usually provides to clients.
“I still tell investors to look for quality investments, hold them for the long term, avoid excessive trading and know their own risk tolerance,” Shepherd says. “Of course, it’s a good idea for everyone to rebalance their portfolios periodically to make sure their investments are still helping them make progress toward their goals. But I would tell anyone that, as far as the sequestration goes, there is certainly no reason to panic or drastically change their investment strategy.”
Edward Jones is an investment firm providing financial services in the United States and Canada. The firm is headquartered in St. Louis, Mo. For more information on Edward Jones website is located at www.edwardjones.com, and its recruiting website is ww.careers.edwardjones.com.