The market started out with a boom today, but walked away like a lamb.
It appears to me like there was a lot of selling done today when the market jumped out of the gate so high. Often when rallies like this take place, many people take the opportunity to get out of the game by paring back investments.
While I am never an advocate of completely pulling out of stocks, investors have been pulling back from equities for some time.
If you look at the Barron's weekly magazine, they have a section on mutual funds. At the beginning of the section, there are charts from Lipper Associates showing the weekly inflows and outflows of equity mutual funds, bond mutual funds, muni mutual funds and money markets. I haven't looked at it in two weeks, but the last time I looked the outflows from equity mutual funds were significant and continuing for several months. Furthermore, Treasury bond yields have been falling. When the demand for bonds rises significantly, yields fall and yields have been dropping markedly for a number of weeks.
What this means to me is that the average investor is getting more nervous about the state of the economy and tilting their portfolios to the safety of bonds. We know tariffs, while not increasing at the present, are not going away. The number of CEO's seeing a recession near term is growing as a percentage. The manufacturing index has been declining since January. Lastly, companies have been reporting the adverse effects of the tariffs that are already in place,
I see the trends indicating it is time to exercise more caution and be more careful with stocks that have fundamentals that are tailing off. While selling all equities is never wise, it is a wise to be careful. With sales, it is always tough to know when to sell at the top and tough to know when to rebuy at the bottom. To do it well requires investors to time the sale and the rebuy perfectly. If you have lived through a couple of market cycles, you know that the unicorn investor who does this is just pure fantasy! The chance of it happening just once is small let alone the "two step" being done consistently.
In the old movie Witness, Harrison Ford is hiding out on an Amish community to evade some rouge policemen. When Ford decides to leave his place hiding among the Amish, the grandfather gives him some stern advice to "Beware of the Englishman". To you I say. "Beware of the marketman!"
