What’s an Investor to Do?

If you’re a stock market speculator and you’ve got money waiting to invest, chances are you’re frustrated by the current environment. The stock market, in spite of being oversold in March, posted a solid bear market rally, but looks now to be resuming its downtrend.

When I say “downtrend,” I’m not trying to predict the future. The fact of the matter is that the stock market is awfully good at betting on the future, not predicting what’s going to happen. To predict what’s going to happen to the stock market beyond a couple of quarters is just plain guesswork.

Inflation is now the big worry and this will be followed by interest-rate policy. One thing’s clear to me; it seems reasonable to forecast that the housing market is going to be in a slump for quite some time.

So, if you’re an investor, you pretty much can be assured that you aren’t going to get much of a market tailwind with any of your positions. This means that if you are speculating in stocks right now, you had better own the right ones.

If I were putting new speculative money to work in the market at this time, I’d be sticking with those stocks that are already winners. I’d be betting on those stocks with a track record of success over the last year; buying stocks that have already gone up in hopes that they’ll keep ticking higher.

I don’t think there is going to be much short-term gain in investing in turnaround opportunities in the current environment — not with the way fundamentals are pointing.

Be prepared for very choppy trading action ahead. The stock market is unsure of itself and is very susceptible to prevailing economic data.