Playbook: Market-Memorial Day Weekend
Playbook:
I wanted to elaborate on one point that I'm not sure was very clear in our latest letter. I stated that I think the most likely scenario will be that stocks remain mired in the same trading range we've been seeing since last fall. Memorial Day begins the summer season and there has been a traditional belief that stocks don't do well over the summer in terms of returns. There is conflicting data on that. I think the best way to characterize what we know is that stocks tend to hold their own throughout the early summer months. However August to Mid-October can be pretty dicey. I'll flesh this out with some data in a future post. The point is that I think this year we stand a very good possibility that stocks won't be much higher or lower {plus or minus 5-10%} from where we are right now.
I think that we have currently entered into some sort of corrective phase after the run up we've seen since March. Whether that is a correction of time {a market that essentially flops around and goes nowhere} or price (some sort of decline} is currently open to debate.
What we've done is to become somewhat more defensive in our posture. For appropriate accounts we have raised small amounts of cash. You should note that even if we have raised cash in your account than in many cases this is still at lower amounts than we have normally carried around this time. Some of the securities we sold were trades that we entered into on a more tactical basis during the spring and we have now sold out of some of these. We will look to re-enter these if the market pulls back at some point. We are also redeploying cash into areas that we think will be leading sectors going forward. We have discussed some of these in the past. Currently some of the sectors we favor include energy and materials, financials-in the belief that the worst of the banking crisis is behind us; and technology. In keeping with our energy and materials theme, in appropriate accounts we have also added some positions in gold and oil through ETFs.
We have also gone about the process of beginning to repair positions ravaged by last years bear market. I will describe how we are doing this in a future posting to you.
I wanted to elaborate on one point that I'm not sure was very clear in our latest letter. I stated that I think the most likely scenario will be that stocks remain mired in the same trading range we've been seeing since last fall. Memorial Day begins the summer season and there has been a traditional belief that stocks don't do well over the summer in terms of returns. There is conflicting data on that. I think the best way to characterize what we know is that stocks tend to hold their own throughout the early summer months. However August to Mid-October can be pretty dicey. I'll flesh this out with some data in a future post. The point is that I think this year we stand a very good possibility that stocks won't be much higher or lower {plus or minus 5-10%} from where we are right now.
I think that we have currently entered into some sort of corrective phase after the run up we've seen since March. Whether that is a correction of time {a market that essentially flops around and goes nowhere} or price (some sort of decline} is currently open to debate.
What we've done is to become somewhat more defensive in our posture. For appropriate accounts we have raised small amounts of cash. You should note that even if we have raised cash in your account than in many cases this is still at lower amounts than we have normally carried around this time. Some of the securities we sold were trades that we entered into on a more tactical basis during the spring and we have now sold out of some of these. We will look to re-enter these if the market pulls back at some point. We are also redeploying cash into areas that we think will be leading sectors going forward. We have discussed some of these in the past. Currently some of the sectors we favor include energy and materials, financials-in the belief that the worst of the banking crisis is behind us; and technology. In keeping with our energy and materials theme, in appropriate accounts we have also added some positions in gold and oil through ETFs.
We have also gone about the process of beginning to repair positions ravaged by last years bear market. I will describe how we are doing this in a future posting to you.
*Long ETFs related to energy, materials, financials technology, oil and gold for appropriate client accounts. Investors who are not clients of our firm should either do their own homework or consult with their own investment advisor to determine the appropriateness of these investments for their portfolios.
posted by CR English at 7:38 AM
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