"History does not repeat itself, but it does rhyme."
If history is our guide, we are, from a seasonal perspective, in the sweet spot for the markets.
Since 1950, 94% of the year's average gain, a little over 8%, could have been obtained between October and April.
Even with the recent market correction, we remain in a cyclical bull market and could make a new high in the months ahead. That being said, increased market volatility should be expected as politicians begin debating a resolution to the Fiscal Cliff.
I will be publishing The Gerritz Letter on a quarterly basis from now on. I will keep you up to date via my blog, Gerritz InSights, as usual, but a little less frequently; I want to take the focus off the short term, in favor of taking a longer term perspective.
I think we can capture better returns by being willing to endure a bit more volatility. The key is to carefully select investment positions that have the strongest fundamentals, i.e., strong earnings growth and relative strength in the top ranked industry groups (ERG). The winners will ultimately get rewarded.
High frequency trading coupled with market moving news events have resulted in an environment were share prices move extremely fast; this is not your father's market.
I have the tools to identify the best investment candidates as well as a support network comprised of brilliant market analysts and individual investors that have a real passion for the markets.
The Daily Snapshot and the GWM Market Direction Model provide us information about the condition of the market. I think they are effective at demonstrating the ebb and flow of fear and greed in the market. If you follow these very visual portrayals of the evolution of the markets over time, you get a good sense of the rhythm of the markets. Market fluxuations are normal and should not be of concern; it is at the extremes in valuation however that warrant our attention. This is the point where investors gain or loose the most money.
Ian Woodward, HGSI analyst and group mentor, provides us with this important graphic depicting the emotions of investors during evolving market cycles.
(Click on charts for easier viewing.)
(Then click the large white X in the upper right corner to return to the blog)
|Market corrections should be viewed as opportunities to load up the boat.|
They are also the most difficult time to invest because
we are naturally most fearful. Fight the fear.
Warren Buffet once said something like:
"Be fearful when others are greedy and be greedy when others are fearful."