Stay Calm and Carry On

BY CHRIS HANLY

Investment Consultant, Gary Goldberg Financial Services

Stay Calm and Carry On is my message to investors. While the recent bout of volatility is highly unpleasant and stomach churning, it is also approaching the irrational and is largely unfounded. First and foremost, our view is that while the Ebola outbreak is serious, it is serious for West Africa, and must be put into context as it pertains to the United States. Media hysteria aside, the Ebola crisis should not be viewed as an economy-impacting event. Second, the sharp fall in oil prices will ultimately prove beneficial to the U.S. economy and will keep inflationary pressures subdued.

This will allow the Fed to maintain its current easy monetary policy, including low interest rates for an extended period of time (most likely longer than most expect). The combination of 2.5 – 3 percent economic growth, low interest rates and an absence of overall inflation will prove beneficial to corporate earnings. Third, while the economic developments, or lack thereof, in Europe are disappointing and worrisome, they are hardly new or surprising. Europe is in a mild recession, just as it has been for several years, and is likely to remain for several more. So given all of this, what should you do? Is now a good time to invest? In short, the answer is yes, as long as you have a three to five year time horizon. More significantly, if you are already invested, here are the type of investments you should focus on:

• Dividend raisers – companies that have raised their dividends consistently tend to continue to raise their dividends. Moreover, these companies also tend to outperform peers that don’t raise or don’t pay any dividends. Given the tax-advantaged status of qualified dividends both growth and income oriented investors should appreciate a rising dividend payment.
• Strong Balance Sheet – “Blue Chip” stocks like Verizon or Procter & Gamble, as well as leading growth companies such as Apple and Google have something in common – they have a strong balance sheet. One of the best ways to know that management is running a tight ship and remains focused on growing “the right way” is by looking at the companies’ balance sheet.
• “How” matters – how is the company growing? Some companies chose to grow organically, others through acquisitions, and some do both. The critical question for investors is “how” is this company growing? Acquisitions may be a good way to boost revenue, but may negatively impact margins and profits (remember AOL / Time Warner). Organic growth is generally a good thing, but are acquisition opportunities being ignored? This is hard work, but looking at “how” matters a great deal.

If you are feeling overwhelmed or nervous, meeting with a money manager and financial advisor can help ease the tension. Call me at 800-433-0323 extension 247 if you’d like to take advantage of our complimentary portfolio review service.

Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at 845-368-2900 ext. 247 or chris.hanly@garygoldberg.com.