There's no easy way to make a case for investing in the stock market based on what's happening in the United States these days.
But let's try anyway, because what a lot of people are doing right now with their investments isn't helping them much.
The uncertainty that's keeping people mired down in conservative, do-nothing investments was an underlying theme Wednesday as the U.S. Federal Reserve took another shot at reviving an economy that has generated the highest unemployment levels in 26 years.
Basically, this latest second round of quantitative easing (hence the term QE2) means the Fed will spend $600-billion (U.S.) by the end of next June to buy bonds issued by the U.S. government. Interest rates should fall as a result of the Fed's shopping spree, and that in turn will lead, ideally, to more spending and borrowing.
The Fed's manoeuvring is considered good news by the stock markets, which have rallied in recent weeks for reasons that include anticipation of more help for the economy. Yes, it's odd to see the markets so happy at developments that highlight the scary shape of the U.S. economy. But there's no getting around the fact that the U.S. markets have just had their best September in 70 years.
Can this continue? Frankly, there are many reasons to be afraid of putting money in the stock market right now.
A double-dip recession is one. Economist David Rosenberg wrote in Report on Business earlier this week that the U.S. economy is weak and could contract again. Canada's economy is stronger, but problems in the United States cannot help but leak northward.
Another reason for caution is the plain fact that stocks aren't cheap. While almost $1.6-trillion sits in bank accounts, GICs and bonds in this country, both Canadian and U.S. stock markets have come a long away from the depths of 2008. In September and October alone, the S&P 500 stock index jumped around 12 per cent.
In a note issued this week, the investment counselling firm Tacita Capital cautioned investors that the price-earnings ratio for the S&P 500 - that's the most widely watched measure of how expensive stocks are - is at least a little above average according to three different ways of slicing the data.
Following Tuesday's midterm U.S. election, political gridlock appears to be a risk for the economy and, by extension, the stock market. If extraordinary measures are needed to generate growth, can Republicans and Democrats agree on what to do?
The case for getting into the stock market now refutes none of these points. Undeniably, it's a rotten time to think about venturing away from investments in which you can't lose money and move into those erratic stock markets.
So, when's a better time? Unfortunately, the stock markets never send an all-clear signal.
That's why it's time to get moving now by shifting some of your safe money into the stock market. Don't lunge into stocks, ease in. Buy some stocks, mutual funds or exchange-traded funds now, repeat in three months and repeat again and again. Or, go monthly.
They call this dollar-cost averaging and it's usually promoted as a way of ensuring you'll get to buy some stocks when prices are low while protecting you from buying too much when prices are high. Today, it's all about protecting your fragile investing psyche. Buy gradually and you'll minimize the shock if there's another financial crisis or other disaster.
One of the lessons of the past few years is that the stock markets are not for everyone. Some investors should be in guaranteed investment certificates and nothing else because, for them, the pain of losing money outweighs the benefit of making money.
Just be sure to make an informed decision about your risk tolerance. Low risk means low returns, and that in turn suggests you'll need to either save more money for your retirement or prepare to live on less.
The stock market is not an easy path to higher returns, as we all know after 2008. But if you need to grow your money at a rate that's better than the 1 to 3 per cent available from safe investments, then it's your best option.
You can wait to act on this, of course. A stronger U.S. economy would be nice, and so would cheaper stocks, world peace and a Stanley Cup for the Toronto Maple Leafs. Excuses, excuses.