U.S. equity market in tug of war, or what's new?
It feels like the U.S. equity market wants to go down. It could be said that its run has continued through too much volatility. Much of that recent volatility is focused on the Nasdaq, which has an array of individual stocks that are retreating, while some are maintaining, no broad brush there. Small caps are no longer leading. Big cap dividend stocks are sputtering. What's to make of this market.
There are the indexers who sit and watch, unconcerned as their focus is the long term experience of riding with the markets being ultimately positive, more positive than most stock picking is their perspective.
Then there are the institutional stock pickers who still, one thinks, price the market. Following that are the part of the retail market with decent sized equity portfolios who do not price the market but provide momentum in the aggregate, in one direction or the other. Most of these discretionary players, institutional and individual, seem to be in flux at the moment.
On February 19th there was a post here entitled "The Coming Equity Market Surge" and that basic idea still resonates as a possibility for the second half of 2014. More money flowing into equities, out of close to no-yielding deposits, and a resurgence in corporate profits as underlying strengths in housing, real estate, and exporters shows through, could be the scenario. That could happen. On the other hand there is the concern that the balloon may have popped in biotech and that the M&A resurgence in the technology sector is often a zero sum game for investors, right place right time for some, a big drag for others.
The bet here is to stay standing firm, but with some profit taking around the edges. If a stock is up 200% or more since acquisition a few years ago, one could just take a gain on some portion(Netflix for example up much more than that) and build a capital gains reserve to cover any losses elsewhere in a negative scenario as well as more cash for other opportunities, or for that matter next year's college payments.
Staying engaged, staying safe, and keeping a cushion are the goals. Who's kidding whom? Having been through the 1987 crash, 1991 recessionary downturn, the 1997 Asian currency debacle, the 1998 LTCM provoked global credit crisis, the internet stock bust of 2001, and the collapse of 2008-2009 that led to the so-called "great recession", we know that market events are unpredictable, unsettling, and happen with great speed.
Beware any all-knowing pundits.
There are the indexers who sit and watch, unconcerned as their focus is the long term experience of riding with the markets being ultimately positive, more positive than most stock picking is their perspective.
Then there are the institutional stock pickers who still, one thinks, price the market. Following that are the part of the retail market with decent sized equity portfolios who do not price the market but provide momentum in the aggregate, in one direction or the other. Most of these discretionary players, institutional and individual, seem to be in flux at the moment.
On February 19th there was a post here entitled "The Coming Equity Market Surge" and that basic idea still resonates as a possibility for the second half of 2014. More money flowing into equities, out of close to no-yielding deposits, and a resurgence in corporate profits as underlying strengths in housing, real estate, and exporters shows through, could be the scenario. That could happen. On the other hand there is the concern that the balloon may have popped in biotech and that the M&A resurgence in the technology sector is often a zero sum game for investors, right place right time for some, a big drag for others.
The bet here is to stay standing firm, but with some profit taking around the edges. If a stock is up 200% or more since acquisition a few years ago, one could just take a gain on some portion(Netflix for example up much more than that) and build a capital gains reserve to cover any losses elsewhere in a negative scenario as well as more cash for other opportunities, or for that matter next year's college payments.
Staying engaged, staying safe, and keeping a cushion are the goals. Who's kidding whom? Having been through the 1987 crash, 1991 recessionary downturn, the 1997 Asian currency debacle, the 1998 LTCM provoked global credit crisis, the internet stock bust of 2001, and the collapse of 2008-2009 that led to the so-called "great recession", we know that market events are unpredictable, unsettling, and happen with great speed.
Beware any all-knowing pundits.
posted by John Borden at 5:18 PM
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