Daily Money Tip: Long-term outlook: bullish

Posted: January 29, 2014

Investors are closely watching the Federal Reserve meetings of Tuesday and Wednesday, which is the last series of meetings at which Ben Bernanke sits as chairman of the central bank.

Given the stock market's sell-off last week, could the Fed decide to make any major changes with its bond-buying program? One local equity analyst says maybe - but that doesn't change the long-term bullish outlook.

James M. Meyer, chartered financial analyst for Tower Bridge Advisors, in West Conshohocken, has been telling clients that even if stocks continue this "correction," nothing changes his basic view:

"We continue on a weak economic growth path, that inflation remains low, that bonds are not very attractive long-term investments at the current moment, and that patient economic investors will end up smiling no matter which course the markets take over the next 30-60 days."

Why? There are signs that the U.S. economy is gaining momentum. Long-term interest rates are now lower than they were when the Fed began tapering, he adds.

"The Fed doesn't want to be bold. Taking an extra few months to complete tapering won't matter in the long run," Meyer said. "I don't think the Fed wants to be forced into action or nonaction by markets, but markets can't be ignored, either."

One compromise the Fed might consider at this meeting would be to drop its bond-buying just slightly, and to set the timeline with more detail as to how it plans to accomplish tapering over the balance of 2014, Meyer said.

The analyst offers both a bullish and a bearish scenario.

Bearish scenario: Last week's losses expand into a 10 percent to 15 percent correction.

Now the bullish scenario: The Fed makes statements Wednesday that calm markets. Investors further assume that Washington doesn't do anything to interfere with markets.

"Under this scenario," Meyer noted, "recent losses abate soon and are recovered quickly."

Book signing

For a new business book signing, visit University City on Thursday at 6 p.m. and meet financial planner Alexa Von Tobel. She will be discussing and signing copies of her new book, Financially Fearless, at the Penn Bookstore, 3601 Walnut St.

Von Tobel is the founder and CEO of LearnVest.com, which she created in 2006 to bring financial literacy to women ( www.learnvest.com).


erinarvedlund@yahoo.com

646-797-0759

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