Gone Fishing — Stocks Are Priced Where They Should Be
Wednesday, June 2nd, 2010
By Mitchell Clark, B.Comm. for Profit Confidential
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| The marketplace is already expecting robust earnings, but the current trading action in stocks reflects lackluster sentiment that’s caught in a loop of declining expectations. Debt woes and commodity price weakness are feeding the view that future economic growth will be very modest this year and next. Without any hard data to suggest otherwise, stocks seem to be priced where they should be. And so, there’s nothing to jump on in this market. In fact, there don’t seem to be any screaming buys in any capital market, be it currencies, bonds or commodities. Of course, there’s nothing wrong with this scenario. If you like the buy-low-and-sell-high investment strategy, then you’re almost always in a waiting game, looking for securities to be priced at extremes. This strategy works for stocks, real estate and other things, but it takes a while for the bargains to present themselves. In the absence of very attractively priced assets, you do nothing.I think stocks have another chance to accelerate this year, but only as part of a long period of consolidation around Dow 11,000. Without dividends, investment returns from equities are likely to be very modest over the next several years, reflecting lackluster economic growth in developed countriesThe right shoulder formation of the Dow Jones Industrial Average continues to look ominous to me and, while this is an unscientific technical worry, I have a difficult time getting past the visual representation of the price data over the last 12 years. To me, the historical data represented in chart form suggest an extended period of equity price consolidation. |
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Tags: Ahead of the Street, investment advice, Stock Market Advice, Stock Market News, stock market tips
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
