Just because a story is big news, it doesn’t mean that it is a big deal to the stock market. Trying to co-mingle the market with the news can leave your head spinning.
The new tax on dividend should send stocks lower. And what happens if the deficit level goes from out of control to completely apocalyptic?
If we allow the Bush tax cuts to expire, we could experience a whole other recession.
The economy cannot handle the blow that ObamaCare is going to deal it. It is going to make hiring much more expensive for employers.
Individual stocks may or may not be affected by these exogenous events. What does the deficit have to do with the P/E ratio of Bristol Meyers?
These stories don’t affect the price of Apple, Microsoft, Verizon, or AT&T.
However, a disorderly breakdown in Greece would be negative for stocks. And what happens if China cuts interest rates?
Right now, interest rates are so low that Treasuries can’t compete with stocks.
Even if Obama raises taxes on dividends, stocks will still be far more attractive than Treasuries.
Stocks are historically cheap right now. We aren’t at the juncture where we have seen the bad news on the tape. It is our job to predict what events will do to the stock market, but it is impossible to predict the future.
We can’t predict the future, but we can’t be held captive buy it either. The solution is to invest in individual stocks.
