Stock Market Strategy: Although the outlook described above seems dismal, the rally may not be over just yet. The recent weakness could simply be-end-of-quarter window dressing and/or a bump preceding the holiday weekend. In that case we could rally nicely here. If on the other hand, it breaks down or does not bounce sharply then we might issue a “safety control stop A” otherwise known as “Plan B” or as Monty Python would term it “Run Away”. We are truly at a critical juncture.
- Low rates
- Earnings are expected to be good
- Investor sentiment is overwhelmingly negative, which is good for stocks.
I remain open-minded and ready to participate if things are good or to take a defensive posture if need be. A good approach may be to participate until we get close to the GDP release date. At that point, either raise some cash or place some hedges on your portfolio and try to make it market-neutral. In either event, we continue to focus on income and dividends. There are still many corporate bonds and high dividend stocks paying 8-10%, which is a great return regardless of what he market does. No matter what, stay alert.
Regards – author Keith Springer