Monthly Market Archives
September 2011 – Market Update
We are initiating a new monthly market update for the benefit of our clients and other professional contacts. Our goal is to provide timely information that will help you better understand ongoing changes in the market.
This initial update comes at the end of what has been an incredibly volatile month for financial markets. Driven by a number of events, a large amount of capital has been moved to investments where there is perceived to be high liquidity and low risk. Some of the movement has been consistent with developments in the global economy. However the bulk of this activity appears, to us, to be the result of increased fear and uncertainty that is consistent with panic selling driven by investor anxiety.
At this time, we do not believe that equity market levels are consistent with the underlying value or the fundamental strength of corporate operations. Conversely, the flight to low risk assets has pushed bond yields down to levels that are beyond unattractive.
The market environment over the past month has been ideal for traders looking for short-term, high-risk profits. Indeed, there will be some big winners for traders who are willing to play the high-risk game. At FMA, we are not traders, we are investors. We believe that the disturbing recent level of market volatility will give way to more consistent long-term results. In the interim, as market swings wildly, we will focus on collecting dividend checks and looking for opportunities to capture value in under-priced securities.
Over the past thirty-five years, the average dividend yield on the S&P 500 was over 4.0% below the yield on the ten-year Treasury bond. Today, dividend yields exceed the yield available on the Treasury bond. We have always been believers in investing in companies who consistently share their earnings with investors through dividend distributions; and in their ability to provide consistent cash flow to investors, even in volatile market conditions.
As always, we are available at your convenience to address any questions or concerns you may have. Please feel free to respond to this message with your comments or inquiries.