Stated simply, there are too many people positive on the stock market right now (not just based on my opinion but looking back at research that is conducted showing how people feel about stocks and the direction of the markets). It boils down to the analogy of a boat....if too many people crowd onto one side of a boat, it will lean hard that way and tip over. Think about it like this, back when we had the housing market bubble and everyone thought buying houses and trying to flip them was the best thing going....what happened? The housing market blew up and the price of houses dropped substantially (thank goodness it's been rebounding over the past year). My point is this, I am growing concerned that everyone is so positive on stocks because historically when investor sentiment gets too overly positive, and too many people crowd on one side of the boat, it will eventually end in a possibly significant selloff in stocks. Stocks don't move up in straight lines (hence the title of my blog and rollercoaster), but they have been of late and that is a concern of mine. This is why we've been taking profits and moving money to the side and waiting for stocks to come down in price (buy low/sell high). Now stocks are pretty "high" in price and from my perspective the risk/reward of investing right now is not favorable.
Too many people in the pool right now....might be time to get out and dry off for a bit (can you tell I'm ready for summer already?).
