Markets At a Standstill--Watch & Wait

2 years ago
52

(2/7/22) Markets rallied last week, as expected, coming off deeply oversold levels. Now sitting in no-man's land--will markets retest October lows, or find support where we are, and begin to rally higher ahead of the Fed' meeting in March? What happens next--and how do you manage your portfolio accordingly? If you think we're in a bear market, raise cash by selling off poor performers in your portfolio, you could potentially be on the wrong side of the trade, should markets rally-on. You'd find yourself trying to get back in just as markets are re-testing previous highs. But, if you get bulling, thinking markets will retest those highs...and markets go the other direction, you will find that you've compounded the risk in your portfolio. Whilst sitting in no-man's land, the best thing to do is watch and wait and use the rally to your advantage, jettisoning poorly performing stocks in your portfolio, and trimming risk on those that are doing well: Don't remove winners, but take some profits and prune them back. For now, make small changes, allow the markets to tell you what they're going to do, and then react quickly. The biggest risk to the markets over the next couple of months will be the Fed. Small bets, small moves, is the right way to go in this environment.
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