In the past three months, the market has been moving in a very erratic manner. Market swings up and down of more than 1% have been the norm, not the exception. This type of market movement underscores the multitude of opinions on where the market is headed in the future.
Some of the conflicting information includes:
- How will the European debt situation affect the U.S.?
- U.S. Corporations are earning record profits and sitting on piles of cash.
- What does it mean when S&P downgrades the U.S. Treasury Securities?
- What are our politicians doing? Are they going to fix things or make it worse?!?!
This uncertainty has caused the rapid swings we have seen, but the overall uncertainty and recent memory of the recession has led the market down the past 2 months.
Technical trading has been the primary mover of the markets, not the fundamentals. The market fundamentals show a very upbeat future for U.S. Equities. Unlike in 2008, our banks are capitalized and have minimal exposure to the European debt issues, U.S. Equities are cash rich and operating more efficiently than ever, stocks are priced at recession levels, and the U.S. Economy is continuing to expand, albeit slowly. This would look to be a buyer’s market.
So what am I doing? I have taken this time to reposition assets to be invested in well managed companies that will give a superior return when the market returns to trading on the fundamentals.
I understand that reading negative stock market headlines every day can weaken your resolve. But it is during those darkest times before the dawn that you want to buy stocks, so that when the sun comes up, you are well positioned for the market rally to come.