The market has been on a great run since December, but I’m sensing investors are becoming more cautious about the longevity of this spurt of stock price appreciation. I say this not from reading articles of authors opining about such matters. It is actually the behavior of a handful of stocks I watch that makes me wonder what’s going on ‘out there’.
What I’m seeing is a trend where the market can be flat or down, while certain stocks actually go up. They’re bucking the trend. Why is this occurring? The first question I would ask is what type of stocks are we talking about? Are they the same type of stocks and, if so, what characteristics do they exhibit? They are all value stocks that pay sizable dividends. The dividends are seen to be very stable or stable and growing. These are stocks that I would use as my more conservative equity bets. In the case of this group of stocks, if the market falls, I still will receive a dividend and ride out the storm knowing that a temporary set back in share price does not mean all is lost.
I’m concerned that the ‘odd’ behavior I’ve seen on multiple occasions is the behavior of a large amount of investors repositioning their portfolios to ride out what they believe is a coming market downturn.
My conclusions might be totally off base, but even if my observation is correct, the behavior of a certain group of investors does not mean they know the future. Yet, the market is driven by the supply and demand of investor money. People can become spooked for correct or incorrect reasons.
If you’re an investor that has seen significant gains since the fall (season), it might be a good time to consider taking a profit. It’s hard to call a market top, but it’s easy to execute a trade and lock in a profit. Don’t be a pig.