Daily Market Update – Jul 8, 2014 (8:00 AM)
Yesterday was, what has seemed to be a rare day. The market not only traded lower, but the broad market was weaker than the major indices indicated.
For someone who may be in the market to buy stocks in a meaningful way, yesterday’s decline wasn’t enough. It also wasn’t enough to send any signals that perhaps there was more to come.
There’s still some talk of money on the sidelines from more than 5 years ago. It’s hard to believe that could possibly be the case, but it’s just as hard to believe that anyone who has been on the sidelines that long would pick this as the right time to re-enter the markets.
While I always like to keep some money on the sidelines for unexpected opportunities, in hindsight those opportunities have been nearly every day for the past two years. I don’t know how many people that are actively invested also have cash reserves that could come into play, but what would be the catalyst to get those who do to give up on their discipline and go all in?
Also with the competition between asset classes for investment dollars, such as between stocks, bonds and real estate, you have to wonder what money is left in bonds that could come over to stocks, as well as the fact that real estate isn’t facing an exodus of investment dollars.
So you do have to wonder where the new money will come from to push stocks even higher.
Overseas money? Possibly, but with the inter-connected nature of the world’s economies and markets and shift would likely cause market casualties at their source and ripple throughout the world.
Who needs that?
Again there’s lots of focus on the yield of the 10 year Treasury as it approaches 2.6%. The thinking is now that rather than 3%, which was what everyone was watching just a few months ago as that level that would begin to draw investment dollars out of stocks and into bonds, it is 2.6%.
That either represents lowered expectations for returns or just more of the same guessing games that seek to create significance out of that which may have no significance.
One thing that has lost its significance of late has been the release of the FOMC statement each month, as it has become very predictable and often the words spoken by the various Federal Reserve Governors or the Chairman have more sway on markets for that particular moment in time. With the FOMC statement release tomorrow there isn’t great likelihood that today will have any kind of meaningful move higher and probably not much reason to think that it would move significantly lower, either.
With pre-open indications of another mildly negative open I’m not expecting too much reason to abandon a little bit of purchasing caution and would continue looking for some rollover opportunities for some of the many positions that expire this Friday.
While I do find it more exciting to enter into a new position and the initial ROI is generally greater with those, it is the rollover that really makes the returns accumulate. So I certainly wouldn’t mind seeing those rollovers happen while at the same time still being able to conserve cash in anticipation of a day when it could serve me much better, and perhaps with less risk, as well.