Needless to say, this stock market has no memory day to day. Stocks were up nicely yesterday but yet they are down big (1.5%) so far based on weak personal income and spending data that came out this morning. Consistent with what I've been writing about since the first of the month, the market has been rather ugly this month and as it stands now this has been the worst month for stocks since 2011; coming into the year, general consensus was the following:
Japan, which is now down 8% year-to-date, is the best region in which to invest;
stocks will outperform bonds (stocks are now down 5% for the year while bonds are up)
the rate of global economic growth will accelerate;
interest rates will rise
In summary:
I strongly believe that the market outlook over the next few months dictates greater-than-usual caution. Volatility and uncertainty remain my baseline expectation and therefore opportunistic trading will likely trump buy-and-hold investing (which is difficult to manage because an investor has to remain proactive in his/her approach to the markets). I feel that the markets over the next 2 months will be very confusing and it will be prudent to keep higher than normal cash positions as the investment and economic backdrops have changed...and not for the better.
Tough day so far!
