Continuing last month’s format, here are common investor questions from this month:
“With this bull market now six years old, isn’t it time to be cautious?” It’s caution time when few worry. Bull market length says nothing, by itself, about the future. See myApr. 14, 2014 column online. Only excess optimism or a gargantuan, unexpected economic problem can derail bull markets. To date we have neither.
“Could a summer Supreme Court voiding of the Affordable Care Act be a huge disaster?” Could! It would take the President trying to end-run the court by executive order, which could create a constitutional crisis, which would have bigger implications beyond health care. Shy of that, ACA is likely a discounted stock market speed bump as it has been almost from its beginning.
“I read so much about the Fed raising rates this year. Is that a problem?” No! Two reasons: First, you read so much about it–so it’s surely largely priced in already. No surprise there. Second, we have a very long history of initial Fed interest rate hikes, and they say simply nothing about future stock returns statistically looking out 30, 90, 180, 360, 1,080 or 1,800 days.
“With foreign leading U.S. stocks now, should we dump our U.S. holdings?” Last year folks wanted to do exactly the reverse because the U.S. led. Same logic! My Feb. 9, 2015 column detailed why that was stupid. Those who dumped foreign are whipsawed now. Chasing heat gets you burned. Think global always, and unless you think you’re a lot smarter than everyone else, in which case you won’t take my advice anyway, never let yourself vary too darned much from the world’s big weights–currently 52% U.S., 23% Europe and 25% everything else. The world is your friend–more diversification.
“Does that same advice apply to sectors?” Absoposilutely! Sectors: 22% financials, 14% tech, 13% consumer discretionary, 12% health care, 10% staples, 10% industrials, 8% energy and 11% everything else.
Here are five fresh stocks I like now to help you toward that end:
While long down on energy because of oil’s oversupply, it’s still 8% of the world stock market. You need to own some, just in case. You want what does well in good and bad basic oil realities–implying a big market, yet governmental protection–which scream for China Petroleum & Chemical SNP -0.71%, also called Sinopec (SNP, Financial). It’s huge, cheap and should sport a 4% dividend yield this year.
