Michael Vodicka
“Build those stock positions going into the fall when the central banks will be forced to jump back into the game after everything starts crumbling down.”
The S&P 500 has been on a tear for the last year. Take a look at the chart below. (click to expand).
In 2013 alone, the benchmark is up 20%. That’s a huge gain by any standard.
As you can also see on the chart, the market has been trading “sideways” near the recent high for about two weeks. That’s a bullish signal that stocks.
It’s tough to send cash into the market right now at the high. But long-term investors shouldn’t worry about short-term volatility too much. In the short run, if you wanted to time it a little more you could wait for the S&P 500 to hit its trend line.
But bigger picture, beyond any short-term deployment strategies, there’s no question the trend in stocks is still higher. From what I see, it looks like stocks are in a no-lose situation.
- Good data means the economy is improving.
- Bad data increases the probability of central bank intervention
Either outcome is good for stocks. It’s a crazy paradigm, but its exactly how the market has been trading on good and bad news. Either way, it has only gone up.
Here’s my call on the market in the next two months into the end of September.
Clearly the Fed wants to taper QE. The market isn’t pricing that in right now. The Fed’s probably going to make an official announcement in September, but already and going into the event that reality will begin to be priced into the market and pressure all kinds of assets. Including stocks.
If stocks fall, bonds are going to see a pretty big rally and rates would fall sharply. We just saw a massive jump in interest rates so there is plenty of room for rates to fall lower in the short run.
Gold is going to be stable to bid. Again, there is going to be volatility. But long-term, the trend that is driving gold is well in play; and that is the destruction of the dollar.
So for the time being the way to be defensive is to hold onto some cash or bonds and under allocate to stocks. In the next 4-8 weeks on market volatility, weakness in stocks, use as a chance to buy. Build those stock positions going into the fall when the central banks will be forced to jump back into the game after everything starts crumbling down. When that happens, stocks ally, commodities rally, investors make money and everyone’s happy.
But hey, that’s just my call. And generally how I’m looking to play.
Your Investment Partner,
Mike
