Will uncertainty bring the market down?
To start I want to say I am still bullish short and long term. Everyone is waiting for a pullback, but the truth is that since mid November 2010 the stock market has been under "the sky is the limit" theme. It is not that I think the markets can rally in a straight line, but from my perspective many global events going on simultaneously are essential to keeping the markets going higher.
First it was Egypt; many thought this was the event that would bring the markets to a halt. Then it was the negative numbers from the weekly jobless claims, then some big companies missed in earnings, then the climate, the debt, the inflation, and now Libya. In fact we have been looking so hard for a reason for the markets to sell off, and even with everybody waiting for it, it has not occurred.
Despite what everyone is waiting and expecting I am going to look at things from another point of view this time.
I never appreciated 'positive heroes' in literature. They are almost always clichés, copies of copies, until the model is exhausted. I prefer perplexity, doubt, uncertainty, not just because it provides a more 'productive' literary raw material, but because that is the way we humans really are.
To make things clear, I do not think higher levels will come easy; but I still believe they are very likely to arrive. Almost everywhere, economies are starting to consider inflation as a threat. Recent data only makes that point even clearer. Economies are growing and commodities are getting more expensive, so what? the problem with this increase in prices is that as you would guess your money will be worth less in the future. Prices are likely to go higher because raw materials will become more expensive for companies to make their finished products.
Nobody wants to get left behind when it comes to making money. Who would want to keep the same number of dollars for the next couple of years and then realize you need to cut your spending because your money is not as valuable? No one, I hope at least. This is why I believe markets are still going higher. If investors want to get a decent ROI the safest place to put their money is the U.S stock market; when money comes in, stock prices will go higher.
So even though I cannot argue that stocks haven’t rallied for a long time, there is still not enough evidence to say that there will be a change in direction in the near future. I am positive that the stock market will climb higher; although I never want you to forget about being disciplined. It is the most important part of investing, we need to be able to stick to our plan and act upon it. Remember what one of the most successful investors, George Soros, said once:
Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.
To conclude I want you to remember that investing takes time, patience, guts, and being able to seize the opportunities the market gives us. There could be a couple of down days coming this week but in my opinion it will be a good time to get into positions we wanted to get in.
