If you still harbor doubt that the correction in the equity markets now is underway, then all you have to do is check out a price chart of the Dow Jones Industrial Average. Monday’s steep 300-plus point drop in the Dow sent the most widely watched measure of the equity market plunging below its long-term support at the 200-day moving average.
The decline in the Dow marks the first time in more than a year that the Industrials have broken their long-term uptrend, and that situation is a very bearish sign for stocks going forward. The only saving grace here for the markets is that the Dow so far is the only major market metric that has fallen beneath its 200-day average.
The S&P 500 Index continues to trade above its 200-day average, while the NASDAQ Composite also continues trading above its long-term support levels. I think that if we were to fall below the 200-day average, particularly in the broad-based S&P 500, that drop would be the biggest negative signal from the markets for a very long time.
Meanwhile, the correction already has gone into hyper-drive in other regions around the world, particularly in China and the emerging markets. Fear of a continued slowing in China’s growth rate, as well as instability in emerging market currencies, has put heavy selling pressure on stocks in these respective areas.
The iShares MSCI Emerging Markets (EEM) already has plunged below its 50- and 200-day moving averages on its way down to the lowest levels since August 2013.
So, what happens next? Are stocks ready to rebound soon, or will the sell-off continue for a while?
It is my opinion that we will see the S&P 500, as well as other broad domestic equity indices, trade lower in the weeks ahead. Given how far the market became overextended at the end of 2013, it just makes sense that we’ll have to see a little more of a shakeout, and a little more of the pain trade evolve before the selling ceases and before we can call a short-term bottom.
The Dividend Fund Solution
The current decline in the markets isn’t going to last forever, and at some point buyers will step back in to stocks. The next big data point that will help determine the fate of the markets comes on Friday in the form of the January employment report, so we’ll have to wait until then for a better read on what’s in store for the rest of the month.
In the meantime, I think it behooves us to look at funds that offer significant yield to investors. An attractive yield is what makes dividend-oriented funds a good fit in a market climate such as this one. Although many dividend funds have faltered of late along with the broad market, there are several that I want you to put on your watch list as they will begin to look very appealing once the market turns.
The following table shows some of the best international dividend-paying funds available to investors right now. These funds hold large, well-established companies that continue to pay strong dividends. I want you to think of this list of international dividend funds as a cheat sheet of attractive investments once this market settles down.
Get Fiscally Fit in 2014, Part V
During the past four weeks, we’ve outlined the steps needed to become fiscally fit in 2014. This week, we have Part V of our series, which is all about living trusts, wills and guardianships.
When it comes to preparing for the inevitable in life, many of us fail to act responsibly. I know it can be hard to think of ourselves as not being around any longer, but that’s no excuse to neglect this extremely important part of your financial life.
If you have any kind of significant net worth, you need a living trust. When you have a living trust, your desire for what happens to your money, your property, your insurance policies, etc., after you’re gone is in your hands. By setting up a living trust, you control the disposition of your assets by appointing a trustee to carry out your wishes.
If you don’t have a living trust, then everything you held dear in your life could literally be at the mercy of the courts. That means someone who doesn’t know you, has never met you and has no personal interest in you or your family, will decide where your assets go after you’re no longer here. I don’t know about you, but I can’t think of anything more infuriating than having the courts determine where the products of my life’s toil will go.
Yet without a living trust -- and/or without a will -- this may be precisely what happens.
Guardianships also are extremely important to those with children. Who’s going to take care of your progeny if you are no longer there to do so? Where will your assets go, and who will look after those assets for your children? Without a guardianship, the courts are in charge. Don’t let that happen.
A little proper planning is all it takes to make sure you are in control of your assets after you’re no longer here to do so. If you already have a living trust, will or guardianship, make sure you periodically review the trust to make account for all of the changing circumstances in your life. A divorce, a significant change in your financial situation or the death of a spouse are all prime reasons for you to alter your financial plans, so make sure you have those plans in place and up to date for 2014.
Next week, we’ll conclude our series with a discussion on insurance and annuities.
Only If You’re Lucky Now
The lights will draw you in
And the dark will bring you down
And the night will break your heart
Only if you’re lucky now
Ryan Adams, “Lucky Now”
The singer/songwriter has a poetic way with words, and here he reminds us that no matter how extreme the ups and downs in your life, the fact that you are living and embracing the experience makes you truly lucky. Remember those words the next time things don’t go your way, and also the next time you’re on top of the world.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.
In case you missed it, I encourage you to read my e-letter column posted last week on Eagle Daily Investor about where stocks will go as we head into 2014. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.
Doug Fabian has continued to uphold the reputation of the Successful Investing newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest.
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