For most of this year, U.S. stocks have been able to dodge every obstacle thrown at them and deflect every new headwind that arose, all while continuing their uptrend en route to record highs. "We're just waiting for a better entry point," scores of lagging fund managers said, while ruing each passing day and record close.
But now, thanks to the weakest jobs report since last spring, the stock market is selling off in early trade and forcing investors to, once again, take a long look in the mirror and make a tough decision: buy the dip or stay on the sidelines.
As my co-host Jeff Macke and I discuss in the attached video, the decision to get in or get out of stocks depends on whether you're in or out in the first the place. "Right now, today, you decide whether or not you want to be long," Macke says. "Truthfully, if you've been long year to date, you're going to be more inclined to take some gains off than the folks who have been on the sidelines all year."
Even before today's data-driven dive, lofty stock prices were already driving a rotation into the relative safety of defensive sectors such as Staples, Health Care, Utilities and Telecom. At the same time, much has been said about a great rotation out of bonds and into stocks this year as being at least partly responsible for fueling the S&P 500's 10% year-to-date gain. But thanks to today's fear-stoking jobs number, demand for safety has driven the 10-year Treasury yields back below 1.7% again. Add in weakness in Europe and the spreading chaos in China, Japan and North Korea, and as Macke says, "There's no place to go other than stocks if you're even going to hope for returns."