Posted on by Tim Porter

Emotional Response

Jan 22, 2016

Emotional Response

The plunge in U.S. stock markets is an “emotional response” obscuring expansion in both the American economy and corporate profits, said Abby Joseph Cohen, president of Goldman Sachs Group Inc.’s Global Markets Institute. 

The fair value for Standard & Poor’s 500 Index is 2,100, Ms. Cohen said. The S&P last closed above that level on December 1 and has fallen 11% since, after turbulence in China’s stocks and currency spurred a global market rout. “What is happening is really very much an emotional response,” Ms. Cohen told Elliot Gotkine on Bloomberg Television. “We need to put things into perspective. Stocks are probably… the best place to be.”Emotional Response

Ms. Cohen echoes the feelings of many, including Josh Peters, CFA and Matthew Coffina, CFA from Morningstar. We’ve hired these two to pick solid performing stocks over the long run for our clients and us.

The fair value of the Dividend portfolio we utilize is 11% higher than it is today. This means when headlines calm down and emotion pulls back, there should be an 11% upside in the stocks we own plus the dividends that are paid. 

Proof of this conviction is shown in Peters’ latest buy (yesterday) of Genuine Parts GPC, an auto parts distributor most known for their network of Napa stores. GPC is 7% undervalued, pays a 3.2% dividend, and has an incredible history of uninterrupted dividend increases, 59 YEARS! We’re looking to follow Peters’ lead by adding this position to those clients with cash in the near future.

While we don’t know how long this emotion will last, we do know investors eventually get tired of the drama and will once again look to fundamentals, instead of headlines, to value stocks. Whether that happens this month or later this year, the portfolios are in great shape to take advantage of the rebound.

Please rest assured we’re watching the latest developments and are doing our best to take advantage of the opportunities this emotional response has given us. Please call or email if you have any questions or care to discuss anything further.