Dow 14,000: Back to Break-Even
Investors often look at headlines to determine whether or not the market is doing well. However, the level of the Dow is of little importance in terms of future investment decisions. What really matters is if fundamentals have improved and if macro conditions allow for a march forward for the markets.
The key statistic to watch for is valuation level. And valuation levels as they stand today are significantly lower than when the last 14,000 level was reached in 2007.
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Cash balances in general are higher, employment levels are lower at companies increasing efficiency, and global conditions are improving. This is what matters and not if the Dow is at 14,000.
Headlines are exciting but not the best indicators for your future investment strategy.
We look at fundamentals as a foundation for our process and that gives us some degree of optimism (despite current global headlines) that markets may continue to march forward from here.
Whether you agree with our perspective or not, let's agree that Investing on hype rather than rational thought is probably not a good idea. Headlines are interesting but should not be the main driver of your investment strategy.
Read and digest but do so with a healthy degree of skepticism and context about the past as well as current economic and macro conditions. That's a better way to make prudent investment decisions.
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Michael Yoshikami, Ph.D., CFP, is CEO, Founder and Chairman of the DWM Investment Committee at Destination Wealth Management. Michael is a CNBC Contributor and appears regularly on the network. DWM is a San Francisco Bay Area-based independent money management firm that provides fee-based wealth management services to institutions and individuals around the world. Michael was named by Barron's as one of the Top 100 Independent Financial Advisors for 2009, 2010, 2011 and 2012.