It is time to become more aggressive and start changing your investment portfolio back to its long term asset allocation.  Because the economic uncertainties continue to be challenging, we do not recommend that you move your entire portfolio into your long term asset allocation at one time.  Instead, we recommend that you move it gradually over 4 months, in 5 increments, starting now. We further recommend that, to the extent possible, that the first change utilize money managers that fit into one of two categories:  (1) that are tactical, willing and able to change asset classes to take advantage of investment opportunities while attempting to reduce downside risk; and (2) that can purchase investment from anywhere around the world including emerging markets.

It is important that you contact me at my office to discuss how to implement this strategy for your portfolio – call (610) 868-9000 or (800) 383-8297 or email triddle@valleynationalgroup.com

While we are recommending clients become more aggressive in their investment strategies, we are not forecasting that the U.S. stock market will move straight up from here.  In our opinion, there is a 50/50 chance the stock market may well experience a correction in the near future in reaction to any number of economic challenges, such as:  increased foreclosures, increased unemployment, increased commercial mortgage foreclosures, increased legislative uncertainties, increased municipal bond difficulties and others.  Assuming that these turn out to be merely challenging and not overwhelming, the stock market should be able to rebound from a correction caused by these.  That is the reason why we chose to recommend that investors gradually over 4 months return to their long term asset allocation.

On the other hand, we recognize that our economy and the stock market continue to be fragile.  They are susceptible to another major loss if an external shock occurs.  If such an event occurs we would immediately reverse our recommendation to become more aggressive.  We cannot predict when or if one of these external shocks will occur.   And, we believe it is unwise to delay investing because one of these event MIGHT occur.  Instead, we intend to react as soon as possible to their occurrence in order to attempt to minimize your downside risk.  Here is a sample of some of the external shocks I am discussing in this paragraph:

1.  Unforeseen terrorist events like 9/11.

2. Military action in the Middle East involving Israel and Iran.

3. Outbreak of a deadly pandemic (note:  I am expecting the swine flu to be a widespread pandemic after students return to school but I am not, at this time, predicting it to mutate into a serious deadly pandemic – if it does mutate, we must react quickly to reduce stock market exposure).

4. China’s unwillingness to buy U.S. Government Bills, Notes and Bonds.

5. Political instability in Mexico, China, India, or other major trading partner.

6. A nuclear event.