The recipe is simple. Too many bulls, not enough bears and record high stocks. This as the latest AAII survey of sentiment shows shows confidence is rising almost as fast as the market. All the while, fear is down and registering less than a third of what is typically does.
What's an investor to make of all this? Raise a little cash says Simon Baker, CEO of Baker Ave Asset Management. "Everyone knows this is the most hated rally," Baker says in the attached video. "Most people aren't up 22% (this year), and every time they've tried to get out of the market they've gotten burned."
Baker still likes the market longer term, but as a self-described tactical firm, he says he is trying to take advantage of a short term imbalance in the market.
"We've raised a little bit of cash here," he says, explaining that "the altitude is getting a little high" in the market. But his move to the sidelines is only temporary, largely because he thinks the longer term uptrend is still intact, especially since the Fed is continuing to pump money into the markets. "You have to be long the market," he says, before quantifying that he thinks we'll see "a healthy bit of consolidation."
When that happens, Baker says it'll be go time again. In particular, he says he'll be avoiding consumer-related stocks, such as retailers, given the recent plunge in confidence following the government shutdown debacle. Instead, he favors technology and some of the ''higher-beta" plays in social media.
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