Possible stock market growth with the sequester


NEW HARTFORD, N.Y. (WKTV) - The approaching sequester is set to bring 85 billion dollars in automatic federal spending cuts, however many investors aren't concerned. Some, think the market could even grow if the deadline passes with no deal.

"One of the main mistakes that investors tend to make is they correlate economic growth and how fast the economy grows to stock market growth and there's not really a good correlation there," said Matthew Savery, Chief Investment Officer at M.Griffith Investment Services.

Savery says some of the strongest market growth has been when the economy isn't doing its best.

"Growing like we are today, growing at a little over 2 %, and historically that's right in the sweet spot of where the strongest stock market growth has occurred," said Savery.

While the economy will most likely slow down even more with the sequester, he says the stock market might actually get stronger. The new risks could be a positive thing.

"You have to understand where does your return come from? The only reason where you get investor returns is from risk because if there was no risk there'd be no returns," said Savery. "So risk in and of itself is not necessarily a bad thing because without risk you're not gonna have good stock returns."

In terms of your stocks as well as 401Ks and other retirement plans, Savery says his best advice is for people to stick to their plans.

"Meet with your financial advisor, really stick to your plan and don't make rash decisions," said Savery. "85 billion dollars of cuts this year, but its not going to be all tomorrow , it will start tomorrow and then gradually occur over the next year and next decade if no changes occur."

With the sequester approaching this week the stock market is up. Savery says it's been up 6% - 7 % this year even while knowing these automatic spending cuts were coming.

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