Not to be outdone the stock market is sending, in my view, very obvious signals that implies a pullback of between 2 to 5% over the next few weeks or so, ironically leading right up to the March 1st deadline before the Sequester goes into effect. Some savvy, individual investors are already preparing for this market action by shifting out of the stock market (approximately $400 billion during this current bull market) while others are, to me, unfortunately buying at the current top. It looks oversold to me, but conversely, markets that are in theory, overbought, can stay that way for some time. It’s a tough call and I’ll defer to caution right now. January gave us a fantastic run of nearly 6%, practically half of what the S&P 500 returned in all of 2012 and basically 80% of what the Dow Jones returned in 2012, it’s okay to take some money off the table and disengage the cruise control.
I remain optimistic. Q4 earnings reports continue to beat on both the top and bottom lines. Employment continues to improve, housing continues to show consistent growth and personal income is showing some encouraging progression (albeit significantly weak, historically). All considered things are getting better on the whole; the world economy isn’t in free-fall either. Globally it’s a slow growth period. Yes, there’s the potential for it all to reverse, all the more reason to use caution, reassess your equity positions and move some profits to the sidelines at least until we get more clarity of the Sequestration. Call me the polyester sequester investor this month, I’m not willing to allow anything to stick to me while I remain cautiously optimistic.
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Dempster R. “Bobby” Cherry is an Investment Advisor with
Nelson Securities, Inc.