It’s very easy to get caught up in the day-to-day trading action of stocks. Commensurately, it’s also very easy to let the market’s action dictate your view of things.
As I’m sure you’re aware, trading action in stocks hasn’t been very positive over the last couple of months. We’ve been experiencing a small correction and, from my perspective, the stock market is now at a crossroads.
Frankly, the stock market is not expensive right now and third- quarter earnings were downright good, especially considering all the turmoil. With interest rates still low, inflation modestly under control, corporate earnings solid, and the market’s recent correction, I’m becoming increasingly bullish. I’d be a buyer in the market right now.
In the absence of any major shocks to the system, I think the main stock market averages will turn higher in the not-too-distant future. The stock market has already priced in a lot of the negative news that’s out there, and this includes the expectation for slower growth in 2008.
Either we get a new uptrend in stock prices soon, or I think we’ll be stuck with a falling equity market for quite some time. Anything could happen, but if there’s one thing the American economy is good at, it’s righting itself as quickly as possible. In the New Year, I think investors won’t worry as much about the credit markets. The Federal Reserve is doing as decent a job with this situation as possible.
There’s a lot of institutional money out there sitting on the sidelines. Investors are waiting for more certainty in the marketplace. I think we’ll get the certainty that institutional investors are looking for in the not-too-distant future and this will be the beginning of a major shopping binge.