Short-Term Pullbacks Are Gifts To Savvy Investors
The markets, after spending most of the day in the green, turned around by day's end to finish in the red.
After yesterday's FOMC Minutes showed that the Fed was more upbeat about the economy (hardly a surprise), markets came off of their highs and headed lower.
The narrative, once again, is that the more optimistic the Fed is on the economy, the more interest rate hikes we'll see. As I've said before, that's a false narrative, in my opinion, and is not the reason why the market corrected a few weeks ago, and retreated again yesterday.
Simple profit taking, after record low volatility for two years, was the impetus for the recent correction. But the lows have quite possibly already been seen. And the current price action is simply tracing out a new basing pattern from which to move higher from.
I contend that once we get past the next Fed meeting in March, and investors see the continued slow and measured pace on rates, the markets will once again race to new highs as the inflation/accelerated rate hike fallacy disappears.
In the meantime, there will be more volatility. But likely a series of higher lows before we ultimately turn up for good, and make new highs once again.
Given this, I believe each pullback should be viewed as a buying opportunity. Especially since I think we'll be up another 15-20% by year's end.
But the opportunity to profit during this back and forth consolidation could be just as lucrative. Buying stocks near their highs is uncomfortable for some, but shouldn't be. And buying stocks on a dip is just as uncomfortable for others, and shouldn't be. In fact, these are probably two of the best buying opportunities there are, and something the pros consistently take advantage of. For those looking how to properly invest during this gift of a correction, please read our latest commentary...
Stock Investing Strategy When At All-Time Highs
Best,
Kevin Matras
Executive Vice President, Zacks Investment Research
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