The pattern for 2011 has been painfully repeated all year.
There has been a series of positive headlines on improving U.S. consumer confidence. There has been an upward revision on U.S. unemployment numbers. For the first time in several years, there has even been positive news from the real estate sector regarding the sales of both new and existing homes.
Reading all these recent “positive” economic news headlines, you would think that the U.S. stock market should be a good place to be invested in your company 401(k) plan now.
That has not been the case.
When 2011 began, the U.S. stock markets were begging for a string of good economic news just like the recent news on the consumer confidence, unemployment and housing numbers. Now that the good news has come, the bad news from Europe has overtaken all other financial headlines.
In the last few months of this year, the dominant worldwide economic news has come from the financial problems in Europe. Today, the rumors abound that the Moody’s Investors Service is now reviewing the credit ratings of the countries in the euro economic zone.
Other companies that rate the debt quality and economic growth rate of European countries have warned recently that the current uncertainty in Europe would continue well into 2012.
According to the companies that are supposed to know, the potential for a “significant” economic downturn in Europe along with a potential sovereign debt crisis have actually increased in the wake of the agreement reached last week.
Last week, the Standard & Poor’s rating agency announced that it could lower the credit rating of the largest economic countries in Europe including Germany and France.
All over the world, the level of economic concern for the stock and bond markets is at unprecedented levels. For that reason, now may be a good time to “sit this one out” in the U.S. stock markets now.
As we all know, the U.S. economy now longer can operate in a vacuum. All the world’s stock and bond markets are now connected.
Europe has now caught an economic “cold.” Be very aware that the U.S. stocks and bonds that you currently own in your individual company 401(k) account may begin to “not feel well” over the next few days and weeks.