Today’s market weakness compels me to make a few comments here. A couple of weeks ago we went to a neutral stance on the US stock market despite the fact that it had already declined 4% in the preceding weeks. Some may say “Whats the point of selling now after a 4% decline?” My answer is simply that you have to draw a line somewhere because a 4% or 5% decline may be the start of a 10% or even a 20% decline. We’re in a great position with almost all accounts still in double digit returns YTD and with a very large percentage of cash on the sidelines. We can use this decline to our advantage by deploying our high cash % when the inevitable intermediate term rally emerges. I’m not in the business of trying to figure out where the exact bottom is, I’ll be looking for extremes in negative investor sentiment combined with emerging market strength. After a decline of today’s magnitude we’re much closer to significant second half of the year rally.
Always keep in mind that big rallies are born from big negative sentiment and today’s decline will make a significant contribution to negativity.
If you’re a new investor who’s looking to gain an edge or considering becoming a client of RMHI please understand that this is the chance for you to get in cheap without having to chase holdings in a mature bull market. This is why during periods like this I begin to develop my shopping list of future holdings and wait for the chance to buy which will occur when our intermediate term indicators turn positive.
All the best,
No positions mentioned.