March 26, 2014

Invest Now? Or Wait?

I've been doing some market research and came across this chart for the S&P 500 (I added some graphics to highlight certain points):


If history is any indication of the future, based on this chart, we're due for a market correction between 2014 and 2015.  The green arrows represent the market at it's highest point (with the exception of the last "high" arrow), and the red arrows represent the market at its lowest.  The yellow circles at the bottom represent the time period of a typical 6-7 year cycle of the market.

Sometimes you have to know where you've come in order to know where you're going.  

Additionally, the economy seems to be slowly gaining traction thanks to the central banks pumping liquidity into the system and interest rates remaining low.  Corporate earnings are excellent including several M&A activity (mergers and acquisitions), stock buy back programs, and today's CEO annual salary resembling that of professional athlete contracts.  

Historically, it looks like the market needs to correct itself.  But with the Feds and every other central bank keeping it afloat...the market may just keep climbing - unless:
  • there's some type of war
  • or civil unrest
  • or perhaps a looming "bubble" pops
  • or a systemic credit default occurs
If you think something will happen - be ready with cash on hand to jump in and pick up some great bargains on stocks (as there will plenty!).  If you're more optimistic - there are plenty of deals to be had now in the market as American manufacturing, durable goods, consumer confidence, etc. ticks up higher.  

But as for me, I'm cautiously optimistic...for now.  Therefore, I'm looking to go long with a little protection in case there's a downside.  

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