by The Investment U Research Team
The markets are poised for a drop this morning based off the futures and after-hours trading. It appears that there is a growing sense of concern that the recent rally created an overbought situation instead of just bringing us back to mean values.
Fear is rushing back to the markets as data suggests we’re not out of the economic woods just yet.
What it means for investors is that we’re going to see large amounts of institutional selling and buying – as they look to get out ahead of a significant pullback and then rush to establish positions in stocks for the long run.
Domestically this could get ugly for the U.S. markets.
A way to work around this event – that could take a quarter to even out – without moving entirely to cash could be to look to foreign markets that have done well this year.
The BRIC nations of Brazil India and China all have economic conditions that should equate to consistent earnings and stock returns. But don’t forget non-BRIC nations either. Japan and Germany are looking better by the quarter.
Even if you’re still in the bullish camp, you should be aware that on Wall Street, emotions of fear and greed rule to the roost. And if enough of the market believes we’ll have a substantial pullback, they’ll make it happen in their rush to the exits.
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