Current market environment is somewhat similar to the same time last year. Market stays at high level while market participants are very cautious. Market manipulators are not creating panic sell-off in equity stock market but are starting to take profit in commodities market.
Investors are confused in this market environment. As there are huge amount of capital on the sideline, it will drive the herd of investors and cause turbulence in the market.
Although market only slightly retreats in the last week, the speculative trading portfolio is suffering significant loss due to under-performance of individual stocks. Based on prior experience, the majority of previously suppressed stocks sold with loss during the panic sell-offs last year are now a lot above the price of purchase. The stock price may not reflect the fair market value if under manipulation. Therefore the speculative trading portfolio will maintain current holding and wait to see if stocks would be suppressed for extended time.
Worry All You Want, But Stay Invested: Jim Paulsen
A year ago, amid growing fears of a European meltdown, Jim Paulsen, chief investment strategist at Wells Capital Management, was calm but bullish in the face of great skepticism. Today, with stocks trying to punch through to levels not seen since Lehman Brothers was still in business, this plain-spoken Minnesotan is once again eschewing the jitters of the masses and reiterating his case for owning stocks.
"We will still have some pullbacks and scary moments, but we're a long ways yet from the end of this cycle," Paulsen says.
From Paulsen's purview, with sweeping and tangible improvements in the economy, housing, employment, and a backlog of pent-up demand for cars and other big ticket purchases. Add in low household debt levels and high corporate cash stockpiles, and you have the makings of a Minnesota prairie fire within the market.
"I think there's more to come if you can avoid getting shaken out by the fearful periods that we'll still go through," Paulsen says. "If you can stay the course, I think you'll be happy."
The Best Way to Get Off the Sidelines and Into the Market
For many investors, the practice of dollar cost averaging is almost an unconscious one, such as the periodic contributions made to retirement plans, like a 401(k), which happen whether the market is rising or falling. However, when it comes to managing a lump sum, the choice to average it in or dump it in, is up for debate.
First, being in the right type of fund is as important as even being in the market. Second, as Stovall points out, indexes with higher dividend yields and lower volatility are much better suited for lump sum investing.
As far as how best to take money off the table, or to try to better time when to buy dips, Stovall offers up "the 7% solution" which plays off the mathematical anomaly that the average decline of dips, corrections and bear markets since World War II is 7%, 14% and 28% respectively.
"All are multiples of 7, so you could say at each 7% decline threshold, I will then add more money," he says.
As for the here and now, Stovall thinks it will take a few more attempts but, eventually, the Dow and S&P 500 will break through their current resistance levels and move on to new highs.
Forget Defensive Stocks, Stick With Financials and Cyclicals: Paulsen
For now, while Paulsen predicts the trough in unemployment is a long way off, one of his favorite recovery plays is in Financials. He's been hurt by the sector in the past, but is all in now and expecting growing consumer confidence to restore this group to previous glory.
"Clearly we have cleaned up the large cap Financial industry dramatically and created a good operational environment for them," he says, adding "confidence is probably more beneficial to the financial industry than any other sector of the economy."
At the same time, Paulsen thinks there are numerous reasons why investors may want to lighten up on one of the market's most popular investment strategies: Dividends.
"They (dividend stocks) are really closely tied to what the 10-year treasury yield does," Paulsen says, admitting that they've had a great decade, but a reversal is due.
"The thing that drove bond yields down, the best friend of the bond market, has been fear, and it has also been the best friend of dividend stocks," says Paulsen.
Bank Stocks 'Dirt Cheap' as Image Starts to Turn: Bove
The Rochdale Securities vice president of equity research has long held that big banks have been most hampered not by their balance sheets by rather by negative perceptions - from Washington, Wall Street, and individual investors.
"What we're looking at is the complete change in attitude towards this industry from what it's been over the past three years," he said in an interview. "What has killed this industry over the last three years has been the negative psychology. It's not negative any longer."
In a series of notes this week, Bove has sought to show that many of the banks' cash positions actually exceed their market capitalizations.
Sell in March and Go Away?
One year ago today, the S&P 500 was up 6% for the year, and 28% over the prior 6 months. Investors were happy, but nervous. Calls for a correction were widespread, and a little early. The top of the market didn't come until May 2nd in 2011, and it wouldn't be topped again for the next 9 months.
Compare that to this year, where we've now gained 8.6% on the S&P 500 year-to-date, and are up about 28% from the recent lows, but this time in only 5 months. While it's impossible to say where and when the top of 2012 will be, calls for a correction are rampant again, and investors small and large eagerly await a dip and chance to deploy cash.
As much as the Dow, S&P 500 and Nasdaq indexes refuse to buckle, there are other signs that fear is trying to make a comeback and put greed back in its place. Notably, a clear uptick in demand for Treasuries with the 10 year yield below 2% again, as well as the conspicuous under-performance of the Transports (^DJT), which are suddenly lagging at a time when they're supposed to be leading.
Caughey-Forrest, and countless other fund managers like her can't say for sure whether the looming pullback will come in March, but they're counting on one thing: "there's still money to be made in stocks."
Bernanke Speaks, Gold Swoons, Peter Schiff Scoffs: “They’re Doing QE3 Whether They State It Or Not”
"They're doing QE3 whether they state it or not," he declares. "If the Fed admits it's printing all this money, then the dollar is going to fall even faster [and] oil will rise even faster. The Fed wants to create inflation, it just doesn't want to be forthright about it."
It's hard to argue with Schiff on this point. While Bernanke expressed some concern about rising gas prices, he said the job market remains "far from normal" and reiterated the Fed's pledge to maintain a "highly accommodative stance for monetary policy."
"If Fed does raise interest rates, which it should, the very short-term consequences will be horrific for an economy addicted to cheap money," he says. "We're going to have to swallow some bitter-tasting medicine in the form of higher interest rates if you're going to clear out the mess [and] allow the economy to restructure in a way that can have meaningful economic growth. The Fed is preventing from all that from happening."
Schiff admits that "bitter medicine" will include weakness in his beloved precious metals, which have dramatically benefited from the Fed's easy money. "They just won't come down as much as stock prices," he says.
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