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Thursday, March 21, 2013

Buying Stocks Sucks

English: Morgan Stanley's office on Times Square
English: Morgan Stanley's office on Times Square (Photo credit: Wikipedia)
By Rude Awakening
The bandwagon’s getting crowded.

Goldman Sachs, Morgan Stanley, Deutsche Bank, Credit Suisse and Jefferies have all increased their targets for U.S stocks within the last week. Not a bear in the bunch.

The financial media have moved from touting new highs to rooting out the last skeptic standing. Famously bearish analysts are coming around to U.S. stocks at an alarming rate, prompting headlines like this one:

“Another Wall Street Bear Throws in the Towel”

It’s enough to make any contrarian-minded investor sell everything he owns, unplug the router and take a 6-month nap. Except that would be the wrong move.

U.S. stocks are the only viable option right now. Since the rekindled eurozone crisis popped up over the weekend, U.S. markets have shown us just how much ugly they can really handle.

US Stocks vs. Select World Markets

But what about elsewhere?

Europe has given up all its early 2013 gains and more. Asian markets (sans Japan) continue to look weak. Gold’s stuck at $1,600 despite the turmoil. Other commodities — like copper — are getting beat with the ugly stick. Last man standing is Uncle Sam.

I know it sucks to be long with the crowd. But price is telling us it’s the right move.

The earlier stages of a rally are always the most satisfying for anyone paying attention. Think about 2012. It felt good to be bullish in June when the market was bottoming and analysts hated stocks. It felt even better to buy when everyone sold ahead of the fiscal cliff scare.

Don’t get me wrong — 2012 wasn’t an “easy” market. The S&P endured two mini-corrections before posting double-digits gains to end the year. But as long as you didn’t get too trigger happy with your sells every time stocks faded, the market rewarded you handsomely.

2013 feels like a completely different animal. The first quarter is almost behind us, yet we just saw the S&P post three red days in a row for the first time this year. The media’s up and running with bullish headlines. The housing recovery is no longer under the radar. The more adventurous armchair investors are talking about stocks instead of bonds for once.

It’s all part of the big buy-in. We are somewhere within that stage of a market rally where it pays to ride the wave while the latecomers begin to pile in. The rally is no longer a secret. Economic data is solid across the board. The market’s overbought but not completely overheated. It doesn’t feel contrarian to buy stocks... But it’s not time to fight the trend.

You can take some money off the table here if you stuck it out over the past three months. But don’t totally drop to the sidelines. The rally isn’t finished yet — even if it is getting a little crowded in here....
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