It Comes as No Surprise
Well, all of the concern surrounding the government shutdown appears to be over. Government workers just enjoyed a two-week paid vacation (they will be compensated for their time away from work), and we avoid a default on our debt (despite a near impossibility of doing so anyway).
Over the last month, all the fear and panic spurred by our government and the media created a wonderful buying opportunity for long-term investors. Not only did the S&P 500 recover rather quickly, we are now sitting at all-time highs.
There are two key takeaways from the resolution this week and the actions from Congress:
- The Economy Will Feel Little Impact: We will not know the true implication of the government shutdown until fourth quarter gross domestic product (GDP) numbers, a proxy for economic growth, are released in March 2014. However, history has taught us that shutdowns impact the economy very little, and we expect the effects of our most recent one to be de minimus.
- The Media Will Shift to Tapering Again: We fully expect that the media’s desires to keep short-term drama front and center will move their focus back to the potential for tapering of Quantitative Easing (QE) in December. Simply put, we expect more short-term disruptions in the market by year-end.
Let’s Focus on What Really Matters
We remain less than impressed over the government’s decision to fund our operations through February. Our leaders have done nothing more than simply “kick the can down the road,” and we fully expect to be back in the same place come late January as our government once again disrupts global equity markets.
As frustrating as these times may be to a registered voter and taxpayer, investors can continue to use these disruptions as buying opportunities. Investors can profit by using these dips to buy high quality stocks that go on sale.
Rather than put our attention into determining how our government will act or when the Fed will begin tapering, we are more concerned with looking for opportunities in companies that offer real long-term growth potential at a reasonable price.
The bottom line is that the Investment Committee has spent far more time and energy over the past two weeks focused on third quarter earnings and their impact to longer-term growth trends than guessing when members of Congress will resolve their differences. As we move closer to February, our focus and strategy will remain unchanged. Look for ways to profit from the fear and panic of others.