Down almost 300 points yesterday on European financial stability fears, up 210 points so far today on good economic data released this morning showing that the economy is in fact growing albeit slowly. Wow. I do this for a living and this kind of up down up down action really wears on an investor. Of all the money managers that I know, research with and follow, it is unanimous that this stock market has no memory day to day, and trades not on fundamentals and specific individual company news, but rather on emotion and anticipation.
I hate to say it but we are at the complete mercy of our neighbors in Europe. While the banks are extremely undervalued and attractive, it's just not safe to start buying the heck out of them. You have to be careful in buying the undervalued industrials, such as General Electric/Boeing/Whirlpool/etc, because we don't know how the Eurozone economies are going to do (all three companies sell their products globally). We know that our economy is stable and sluggishly growing, but we also know that Europe is on the verge of a recession, one that at this point I believe will happen in 2012. The best place to be invested right now, even despite the attractive valuations of the banks and the industrials, is to be overweighted in cash, and own high yielding dividend stocks. To repeat for emphasis, this is not a buy and hold market, this is a market that is best managed with an opportunistic approach, where an investor can move quickly in and out of stocks and try to achieve small gains.
