Here's a quick snapshot
- Bear market rally within an overall structural bear market.
- A new Bull market, now that the worst is behind us.
- Deleveraging still ongoing, and its about to get worse.
- Over-indebted world economy still drowning in debt.
- The Chinese Markets are about to lead a 'world wide stock market correction'
- Green Shoots everywhere, bull market around the corner.
- Company Results continue to exceed 'estimates'!
- Job losses are increasing at a 'decreasing rate'!!
- Don't listen to the bears who have been way off since March '09
- Don't listen to the bulls, who only resurface when markets are up 50%
- Get into the market now, or you could miss the bus!
Obviously no one has the answer here; but given all the conflicting 'expert advice', what's an investor to do?
Sadly, while focussing on everything that's happening around them, very few analysts ask their investors to analyse their risk profiles before they invest.
Irrespective of which direction the market is about to take; how much 'pain' and 'volatility' is an investor able to withstand before he throws in the towel ?
Markets have been rallying since their March 2009 lows. The stock market and Wall Street experts now see a recovery far far before anyone else on main street. Its important to remember that many of these 'experts' failed to see the dramatic market collapse that occured in the second half of 2008.
What worries me is that a large part of this market rebound has occured from oversold levels (yes, the benefits of hindsight kicking in!!), largely supported by a massive overdose of stimulus medication! This is clearly not sustainable in the long term.
Debt levels are high and many industries face surplus capacity and low pricing power. Job losses continue to demoralise consumers on main street.
Meanwhile, equity markets the world over have provided exciting trading opportunities to nimble traders. But remember; for the average investor, these 'paper profits' may not translate into 'bankable profits' in these chaotic markets.
So, its important to book profits on such investments now. Yes, there's always the risk of selling out early, but there again you just don't want to be the guy who's a day late!! These are cruel markets for a slow moving investor.
Focus on weeding out stocks with weak fundamentals from your portfolio. A rising tide lifts all boats as they say, so offload those positions that don't have the inherent strength to make it in this turbulent economy.
Overall, try and maintain adequate liquidity in your portfolio. In my opinion, the worst is not behind us just yet!
When too many 'experts' start to get bullish, its time to be cautiously realistic rather than recklessly optimistic !