On the Sunday after Thanksgiving, Ben Bernanke, the chairman of the U.S. Federal Reserve Bank, spoke on CBS’ “60 Minutes.” I watched, listened and walked away with the clear impression that he is really concerned about our economy’s ability to move forward and beyond the issues that face us, including unemployment, mortgage defaults, the continual decline in real estate values, the threat of deflation and U.S. business’ refusal to spend its large cash reserves. Bernanke expressed hope and reflected on some positive indicators, however, serious problems persist and he does not feel fully confident yet.
Since watching that interview with Bernanke, I have listened to several highly regarded, world-renowned economists who seem to think the American people are back on the path (albeit slow) to prosperity. I know it may seem like overload, but I sat and listened to Economists Michael Mussa (former head of the International Monetary Fund) and Randall Kroszner (a former Federal Reserve Governor) at the Economic Forecast Lunch put on by the University of Chicago Booth School of Business; attended a dinner with Michael Moscow, a former head of the Chicago Federal Reserve; joined a CEO roundtable group to hear Booth Professor Emeritus Robert Aliber speak; and just recently attended a dinner where former World Bank President James D. Wolfensohn spoke. I also tune into financial news on CNBC from time to time when journalists interview economists or investment strategists.
The consensus? With the exception of Ben Bernanke, economists are quite positive that the U.S. economy is back on track.
I believe Ben Bernanke has more information at his fingertips than all these other world-famous economists combined. So even though we are seeing improvements in the economy in many different areas, we should be concerned and cautious about the future.
So how does that apply to your portfolio? I recommend that you still want to have some exposure to the stock market because if you wait until all the risk is out of the market, you will have missed the rally. However, do keep some balance between stocks and other noncorrelating investments such as bonds (probably best to stay away from bond funds with rising interest rates–individual bonds might be a better choice). Keep a good year’s worth of funds on the sidelines, stay well-diversified and continue to save.
Ben Bernanke official portrait via commons.wikimedia.org.
Disclaimer: The views expressed in this article are the opinions of the author and should not be interpreted as individualized investment advice. Investment objectives, risk tolerances and the financial situation of individual investors may vary. Please consult your financial and tax advisors before investing.