You'd think by now that we would have seen enough instances of the market digesting headline risk this year to build a case for stocks. And yet here we are, starting another week with the wind in our faces courtesy of our old friends fear, contagion and crisis.
Interestingly, amidst endless reminders and reassurances to not "fight the Fed," investor Jon Merriman, co-Chairman of Merriman Holdings is keeping an eye on the little guy via the American Association of Individual Investors Sentiment Survey that just saw bullishness slump to a nine-month low of 26 percent.
"Near-term, we could have some increased headline risk that could take the market down five to ten percent," Merriman says, but the silver lining there is "that would set us up nicely for a decent second half."
Merriman says that, until individual bullishness rebounds to a level that he calls "full retail participation" in the market, it's not safe to come out of stocks yet. Another possible driver of that bullish sentiment could be a few more social media IPOs along the lines of LinkedIn (LNKD) that are scheduled to come to market in the next three months or so. Again, inversely, he would take the other side of the retail wave, or at least use it to reposition his portfolio for less risk.
Now if you are a so-called little guy as opposed to a big bad professional or institutional investor, don't take this the wrong way. Take it as a friendly reminder that, while you are rightfully busy tending to your job/kids/hobbies/health, there are many people whose only purpose in life is to make a lot of money. These people spend all day and most of the night doing just that, and they will happily take some of your hard-earned cash. So be careful, set reasonable expectations and take steps to manage your risk and downside —- no matter how certain you may feel.
And we do want to know how you feel. Comment below or drop us a line at Breakoutcrew@yahoo.com.
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- the wind