The market has been flying high with the DJIA reaching a milestone closing at 8,017.59 last Friday, April 3. However, the euphoria should not be taken as an all-clear sign to jump in with both feet. I do believe we have reached an inflection point, but volatility still rules the market and the world economy.
A few weeks ago, on March 9, when the DJIA closed at 6,547.05 I suggested the market had reached bottom. It now looks like that is a real possibility. My rationale was straightforward. The point of maximum fear and capitulation -- "The world is coming to an end!"
If you were out of the market from March 9 though April 3 you missed a gain over this period of 22%. Students of market history might remember that 90% of the growth in the DJIA has occured on 7% of the days. I do not mean to suggest that the money you need to live on should be left in the stock market at risk during these troubled times. You do need to set that aside in cash or a diverse pool of financial instruments.
If, on the other hand, you are investing for your long-term needs and you pulled everything out at what might have been a low point, you might have just blown it. Therefore, you might consider returning to the market gradually. If we see our currency diluted, do you really want to be in all cash or treasuries? See: From gold standard to no standard: 'Lightspeed inflation'
|Yes, and glad||125 (45.5%)|
|No, you must be crazy!||97 (35.3%)|
|Wish I did, darn it!||53 (19.3%)|
|On the fence||65 (26.4%)|
I am pleased to say that I have been buying stocks through the quarter at what I considered bargain prices while also cashing in on the palpable fear and negativity I perceived by doing naked puts.
On March 11, two days after thinking we'd hit bottom, I went even further posting Is the stock market spring loaded? Could it move 3,000 points higher now? -- do you think there could be another 1,500 points left in this push upward?