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Sell-Off Roulette: What Will Trigger the Next Pullback?


Pretty much everyone who even remotely follows the markets seems to have seen ''the list" or is at least aware of its contents. I'm talking about the inventory of items that investors routinely cite as reasons why the market may finally acquiesce in the face of widespread disbelief and skepticism.

After circumventing the sequester and easing around Italy and European uncertainty, today's timidity is being fueled by worries out of China. This as the Chinese government has moved to cool down the property market, the economic data du jour was weak, and 60 Minutes took America on a tour of a real Chinese ghost town that showed "miles and miles and miles AND MILES of empty apartments," as host Leslie Stahl told it.

"Anything could happen, but at this moment it looks like China is to blame for today's market," says Kim Forrest, senior analyst with Fort Pitt Capital Group, in the attached video. As she sees it, the Chinese economy has gotten so large over recent years that efforts to "step on the brakes" and slow things down are taking longer than ever to impact the system.

History, of course, would suggest that the real trigger for a sell-off won't be anything off "the list" that analysts and investors are talking about, but rather the result of an unexpected, exogenous shock to the system.

The March 1 budget cut deadline, for example, came and went with about as much fanfare as the Y2K crisis, and market watchers, such as Peter Kenny of Knight Capital, are already minimizing that threat. In a note to clients this morning Kenny writes, "the sequester is so inconsequential in the broader narrative as to be virtually meaningless."

Even though Forrest thinks the market is currently overextended, she isn't necessarily acting on that hunch. "I'm not ever going to sell a whole bunch and go to cash and try to time the market. I think that is a mistake that many investors make," she says, adding that she would never "try to be all-in or all-out" based upon what she expected to happen in the short term.

In case her intuition is right, this Pittsburgh-based investor says she stays prepared and ''always has some money sitting there" should a pullback — expected or not — present an opportunity.