This is a rather odd time for the market. Technically, things are looking great, but fundamentally, things aren’t looking good. is this a case of Mr. Market going wild, or is there something that is just not clear in the fundamentals.
All of the major indexes have started to make new highs. October has been a great month for stocks. Anyone just looking at the charts would think it was a great time to buy. All of the trends have turned positive, and it looks like the Dow Jones Industrials could rally by 10% or more during the rest of the year. Given that bonus season and end-of-year tax planning and investing is in the works, investing in October until January is usually a good bet. It also looks like there is hope for a change in control of Congress, which could lead to less restrictive regulations and an end to the possibility of global warming taxes being legislated.
But the economy itself is not looking good. Despite near zero interest rates, while the economy has come out of recession, firms are making due with less staff. Restaurant and retail traffic has picked up, but people are certainly not spending like before and loans are difficult to get. The housing market also continues to be dismal, with foreclosures reaching record highs and prices continuing to fall.
In looking for stocks to buy the other day, nothing looked particularly appealing. There were a few decent choices, but most things had rallied back to their pre-slump highs, and therefore did not appear to be as much of a bargain.
The thing is therefore to invest, but tread lightly. If you have quite a bit of cash, put some to work, but perhaps hold a little back to take advantage of any pullbacks that ensue. You will miss a bit of the advance if things do rally after the elections, but it will help psychologically if stocks falter. Remember also that markets price things in as soon as they can be predicted. Because Republicans are expected to take control of Congress, the recent rally may have already priced that possibility in. The market may actually slump a bit on the news. It’s funny that way.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing