Since May of this year, enthusiasm for the stock market has waned. This is evidenced by the recent weakness in the main market indices. Even though second quarter earnings were solid, the market’s worries are affecting sentiment.
This is why we expect the stock market to be relatively lackluster throughout the third quarter. Accordingly, I think the third quarter presents an opportune time to consider taking on new positions.
If the economic data supports a slowing of inflation (even slightly) then stocks can rally in the traditionally strong fourth quarter.
Nobody can predict the future, but it often pays to step up to the plate and take on new positions when the broader market action is weak. It does take courage to take on new equity positions when things are uncertain, but if you want to be a speculator in the stock market, eventually you have to be a buyer.
Without question, all equity securities are highly speculative in nature. This is why you don’t bet the farm on any one stock if you can’t afford to lose.
From my perspective, I’m seeing a real disinterest in stock market investing from individual investors right now. People are more interested in mutual funds than trying to pick individual stocks.
This is both good and bad for current market speculators. Although stock market sentiment is affected by a lack of interest from individual investors, less speculators in the marketplace means more opportunity for those remaining.
The broader stock market isn’t expensive right now and this is why I think the current environment is a good time to consider new positions. With a lessening of interest from individual investors, more opportunity exists for the current players who are watching all the time.
I don’t expect much from the main stock market indices over the near-term. The market is still worried about inflation and interest rates. Eventually, however, the Federal Reserve will get a handle on prices and when it does, stock market action is likely to improve.