Page 64 - The Peorian Vol 3 Issue 1 Winter

64 thePeorian.com
C hoosing where you will
find investment returns
for the upcoming year is
fun for readers and crystal ball-
gazers alike. Allow us to share
some thoughts of our own, rep-
resenting our conclusions from a
conglomeration of opinions I’ve
collected.
1) U.S. interest rates have seen
their low point and will likely
rise a bit over the next one to
three years, according to Putnam
( Nov. 14, 2013). It’s already
started, with the 10 year treasury
yielding 2.5 percent versus the
1.6 percent seen in early May of
this year.
Rising interest rates may cause
the price of bonds and mutual
funds to decline. Bond fund in-
vestors may have experienced
a mix of high, declining interest
rates with the potential for above
average return in bond funds.
Those days may be over and
bond investors may face a head
wind instead (low, rising rates).
But don’t fret. There are other
ways to potentially earn com-
petitive returns in fixed income
as well as unique investment
strategies whose returns are not
dependent on the bond or stock
markets. Now is the time to learn
about them.
2) The positive returns we have
seen in the U.S. stock market
should continue, based on the
S&P 500, but in a less dramatic
fashion. Only recently have we
started to see a “net inflow” of
retail dollars to U.S. stock mutual
funds after years of net outflows.
This indicates that the average
investor continues to do what I
call “rear-view investing” – mak-
ing their investment decisions on
what has happened in the past
instead of considering the future.
You wouldn’t drive your car that
way (we hope!).
The past does not guarantee
what will happen in the future.
The good news is that there is a
lot of cash sitting on the sidelines;
if it is finding its way into the
stock market that helps support
stock prices. According to the
Wall Street Journal, corporate
America has a record amount
of cash on the balance sheet.
According to NBC News Busi-
ness, they are starting to use their
cash as well. Ways that corporate
America can impact the stock
market is through buying back
shares, increasing dividends, and
acquiring other companies – all
of which are friendly to the stock
market because they can poten-
tially reduce supply and improve
shareholder value.
Of course, there will be set-
backs. But the belief is that U.S.
stock market performance will
be positive over the next one to
three years, perhaps more. Keep
in mind when investing in stocks
and mutual funds; it involves risk
including loss of principal.
CHOOSE WISELY
Looking ahead at the stock markets
By Bob Miller
Investments