Well it’s been an interesting October so far. The United States federal government has shut down due to their inability to come to an agreement to keep funding operations in order to keep the government running. Along with the shut down, there is the impending possibility of a debt default as they try to come to an agreement to increase the debt ceiling.
As you can imagine, the economic impact of a government shutdown and possible default leaves a lot of uncertainty in the stock markets. A continued shutdown have a lasting impact on the economy while a debt default could be catastrophic to the world economy.
How Has the Market Been Doing?
The U.S. government shut down at the beginning of October. Through the first 9 days of the month, the S&P 500 dropped 1.55% in value. That’s not a huge drop and many would argue the markets needed a correction anyways. In fact, even with the slight market decline, there are still many who believe we should see a bigger correction for the markets to be reasonably valued. On October 10th, there was talk of a deal to increase the debt limit which would push off a default. This resulted in a very nice 2.18% jump in the S&P 500 leaving the index at it’s highest point of the month.
However, no deal has been struck and most likely if a deal is struck it will just push off this ridiculous debate another couple months. Without a long term deal put in place, it makes it near impossible to do long term planning. With so much uncertainty around the government shutting down or paying it’s bills, there will continue to be much volatility in the market.
What Choices Do We Have?
There also continues to be no clear path for the markets going forward. This leaves the everyday investor with a dilemma of what to do.
With so much market uncertainty:
- Should we sell our stocks and hoard cash?
- Should we keep our current stocks but hold future cash?
- Should we keep our current stocks and continue to buy new stocks with available cash?
- Should we cash out everything, take all our money out of our banks and brokerages and hide it in our closets?
The truth is we have no idea what the government is going to do and therefore how the markets will react over the next year.
I’m a firm believer in long term investing. I didn’t accumulate a portfolio of dividend growth stocks just to panic at some point and sell out. The companies I own are some of the most financially stable, blue chip dividend paying companies in the world. They will continue to do business, they will continue to make money and they will most likely continue to pay shareholders dividends.
What I’m Doing
My plan of action through this time of uncertainty is to keep my current dividend growth portfolio as is. I most likely will hold off on making any new buy decisions until we have a little more clarity on what the government is going to do. Will the government default in the near future? When will the government reopen? When I have a little more confident that the government will not default and that they have opened back up for business (at least for a little while) then I will continue on with my investment plan. Until then, I may wait on the sidelines with any new cash available.
Share Your Thoughts
So what about you? Does the government shutdown and possible default cause worry for you? Are you adapting your plan for current market uncertainty or are you plunging ahead with your long term investing plan? Are you continuing to buy or are you accumulating cash while waiting to see what happens over the next couple months?
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