As startling as it may sound, many leading economists now consider the federal deficit a greater risk to the economy than terrorism.
In recent report detailing the lackluster performance of the financial markets and the gloomy mood among professional investment circles, Standard & Poor's Chief Economist David Wyss told Bloomberg news service, "Members of the National Association of Business Economists, by a narrow margin, now believe the federal deficit is a larger problem than terrorism."
The threats of inflation and rising interest rates aren't doing a lot for investor confidence, either, Bloomberg asserts. But it's the numbers themselves that are perhaps most disappointing. As the first quarter draws to a close, Bloomberg data shows stock and bond funds struggling to break even.
The average bond fund, as of the middle of last week, had lost 1.2%. That beats the average stock fund, however, which is down 2.7%. Among balanced funds, the average loss is 1.7%. Aggressive growth stock fund are off by 3.8% and their more cautious, growth and income counterparts are down by 2.1%.
Even money market funds, which take advantage of rising interest rates, are up just a paltry 2%, according to Bloomberg.
But there is good news. After injecting about $330 billion into stock and balanced funds in 2004, an additional $85 million has been added since the start of the year, according to the New York consulting firm Strategic Insight. Furthermore, most of that new money is going into highly diversified funds, like asset allocation and balanced funds, which means investors are hunkering down for the long-term and not chasing quick money like they did in the 1990s.
In the end, the Bloomberg report concludes, it might be a "going-nowhere market," but at least investors are placing time and patience on their side.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.