First thing. No matter how confident or eloquent their case may sound, NOBODY knows where this market or economy is headed. For every long-term bull who is emboldened by how cheap stocks appear now that they've shed 10 to 15%, there is a frightened trader or technician out there who is looking to preserve whatever profits they have left.
There are a few things that most every investor can agree on; that things probably won't magically smooth out anytime soon and that it's really tough out there right now. "There's clearly a lot of volatility in the market and there's no reason to believe that's not going to continue," says John Linehan, the Head of U.S. Equity at T. Rowe Price.
"What you've really got is a push-pull occurring, where you've got very strong corporate fundamentals competing against a very spooky macro environment with the U.S. debt crisis and a looming sovereign debt crisis in Europe," Linehan explains.
So with at least half or perhaps three-quarters of the world struggling with serious economic issues right now, you'd think the concept of avoiding problems via a multi-national business would be difficult. While Linehan agrees, he also thinks that's already baked in to the market.
"If you look at Microsoft (MSFT), AT&T (T), Exxon Mobil (XOM), Wells Fargo (WFC) these are all companies with very strong balance sheets, reasonable fundamentals, and are all trading at less than 10x earnings. For me valuation is a very strong guide as to what you should do and valuation is very attractive in all of those names," says Linehan.
At this pace, they'll be gorgeous by Monday!Read More »from Relief Rally or Not? Market Struggles to Find Its Way