The easy money has long since been made in the market and now pinpointing an investment move is like trying to spot the blade of grass that’s growing fastest. The Dow has been meandering higher for a while now regardless of actual reports on housing, unemployment, or any general indicator of economic growth. What exactly is causing this feeling of well-being?
The current market is a classic example of the Tinkerbell Effect. The more investors simply believe that business is good, the more they actually improve it. Any negative news that might not justify the high P/E’s given to stocks seems to flitter away into insignificance with more and more buying. It’s a reaction to the belief that we have seen the worst already so you might as well buy now.
In such a bizarre environment, parking a load of cash on the sidelines and waiting for an opening to buy in is the best strategy right now. As unrealistic as prices are, only a correction will allow for possible value purchases, otherwise a long term malaise through sideways movements will be the only angle to play.