Since February 11th of this year the s&P 500 has rallied about 14%. Don’t get too excited, this huge market move gets the S&P to a year-to-date return of about 1%. The article below from Forbes may help put the recent move in context with a longer-term view. This is the 2nd large selloff and subsequent rally we have seen over the last six months. How does an investor navigate through these volatile times?
Positioning is a big part of how I make my investment decisions. If EVERYONE already owns “ABC stock”, then there are theoretically no more natural buyers for “ABC stock” and the odds of it decreasing in value are higher than the odds of it increasing. At the beginning of 2016, all of the major investment banks / hedge funds / institutions were CERTAIN the dollar would continue to rise in 2016 – it has fallen over 4% year-to-date.
Today there are a number of areas where investors big and small have “crowded” into certain trades – maybe due to fear, or due to recent positive performance. Look for “unloved” investment ideas for the remainder of 2016. When the crowd starts to love your “unloved” investment idea, you will be glad you got there first.
*All returns are courtesy of Moringstar.com