Whenever investor sentiment seems stuck on negative, I like to step back and take a broader perspective. After Hurricane Sandy, a contentious Presidential Election and the Fiscal Cliff, you might guess that stock prices took a big nose dive in the 4th quarter of 2012.
Bouncing Off the Bottom of the Fiscal Cliff
As I write this post on the last day of the year, stocks are attempting a positive move in reflection of the resilience of capital markets in past few months and the anticipated bounce off the bottom of the fiscal cliff.
I don't use fundamental analysis, nor do I employ technical analysis in making investment decisions for myself or in making recommendations to clients. While I read and incorporate all of the above into my decisions, I look at the bigger picture and think in terms of forward-looking 3-year periods. However, before looking forward, I look back. Based upon the way stock prices have held up in the 4th quarter of 2012 in the face of the 3 major storms of Sandy, the election and the cliff, the market seems to "want" to move higher before it begins a longer, sustained move downward--the beginning of a new bear market.
Investor Herd Ready to Move Forward in 2013
As I commented in yesterday's piece on the fiscal cliff, mutual funds and your 401(k), "stocks, as measured by the S&P 500 Index are down about 3% since October 1, 2012, and bonds, as measured by the Barclays Aggregate Bond Index, are about breakeven." This is not exactly a panicky meltdown that one might expect with so many excuses to run for the exits and sell out of stocks. However, it does say that the investor herd is ready to push the market higher once the current negativity washes out.
With all of that said, we won't try to time the market but rather make small, tactical moves in combination with our own investment objectives. For more on my outlook and portfolio criteria, see my article Asset Allocation Guide - 2013 or my 2013 Mutual Funds Portfolio.