There’s no other way to say this — things are going to be tough for the stock market over the next few months.
Earnings season is over and this is always the best time for investors to look for new opportunities. Not only do you get to see a prospective company’s latest set of financial results, but you also typically get a forecast from the company for the next quarter and fiscal year. This is the latest, most up-to-date information that you can use to make investment decisions.
In the absence of earnings season, anything can happen. Perhaps nothing will happen, who knows? There isn’t corporate financial data to go on, so the market is left to speculate about economic news and the prospects for the future. This can make for terrible stock market action.
Right now, the stock market is worried about low-quality mortgage debt, interest rates, the state of the real estate sector, as well as the usual geopolitical worries. With all this to be concerned about, I think it’s fair to conclude that we won’t see the stock market rally anytime soon.
Alas, there is hope in the current state of things! If you’ve got some winners in your portfolio (which you should, if you bought some China stocks), then you should keep riding them. It’s always wise to cut major losers from your portfolio. Finally, you don’t want to stop perusing the stock market for new investment opportunities.
Despite prevailing market conditions, there is certainly a great stock to be had at this very moment; it’s always the case. The key is trying to find these great stocks. The key is to try and own the best stocks at any given point in time.
If you screen for new stocks, as I do on a daily basis, you might try screening for those stocks with high relative strength. This means those stocks that are outperforming the broader market by a wide margin. It’s easy to do this with any of the free screeners available from most financial web sites.
Those stocks that are doing great right now, with the broader market being in a rut, should represent the strongest stocks in the marketplace as a whole. So, if they are doing well when the broader market isn’t, then their performance is much more likely to be exceptional when the broader market improves.
It’s food for thought in a lackluster stock market. Thank goodness spring is here!