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Stocks had their biggest one day sell off of the year and now we find ourselves under 1600 once again. This has many investors scratching their head as to what changed the mood so much, so fast?
FEAR OF THE UNKNOWN
Investors crave clarity. And when that eludes them, they typically assume the worst.
Yes, there is greater clarity that the Fed is gearing up to remove QE. The problem is; What does the economy and investment landscape look like in the post QE world???
Those throwing their stocks overboard are concerned that it will mean slower economic growth which is not particularly appealing for corporate earnings and share prices. Yet there are many academics who point out that all the extra QE did not really create any economic benefit. So its removal should not be a feared event for future growth.
Further, with bond rates likely rising a notch or two more, it will lead to ample losses in bond funds. Not all that money will flow to cash. So stocks will continue to be an attractive destination for those seeking a positive rate of return.
Unfortunately, the sailing has been too smooth and easy up to this point. The Market Gods demand payment for that now in the form of a correction to test our fortitude. Technicians have pointed out 93 different levels of support that we could fall to (meaning they have no clue).
Likely somewhere between here and 1500 the correction will end. In that time those seeking clarity will become more settled that the economy rolls on and that stocks are still the most attractive investment alternative. Until that time it pays to be more defensive.
Big funds and pension plans try hard to keep others from spotting their key moves too soon. They need time to go all in, drive up the prices, and make big profits in any market condition.
Until now, you could only catch the first hints of their moves if you had the time, will, and expertise to comb through obscure SEC filings. Starting today, you can get in early and easily on the best of these "smart money stocks" - and also see buys and sells from all of Zacks other services - for the total sum of $1.
Use the Zacks Mutual Fund Rank, a quantitative ratings system designed to help you find the best funds to beat the market. See which ones to buy, which to sell and track your favorite mutual fund family.
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