Monday, July 27, 2009

Preparing to put Funds Back into Stocks

Since the beginning of 2009, I have been selling into the rally and hesitant to buy stocks. I did plan to make purchases during a pull back, but it seems the recent window of opportunity passed quickly as the Dow rebounded and advanced past 9000.

At this point, I am beginning to believe that the stock market has bottomed and will be higher at the end of 2009 than today. Here are my reason for being more positive:

  • Emerging market economies. While the U.S and Europe are still in recession, it appears that countries such as China, Brazil, Thailand and other emerging markets are already in recovery. Economic improvement in those regions will help the global economy too.

  • Surviving companies are much stronger. This recession has eliminated a number of weak companies, allowing the surviving companies to gain market share. In addition, the remaining companies have improved cost structures as they prepared for this recession. When the economy emerges from recession, these companies will be positioned to better benefit from the recovery.

  • Government programs perceived to be anti-business are being delayed. Until this week, it appeared that the passage of new government programs with significant increases in spending was inevitable. However, as the negative impact on the deficit becomes more evident, Congress has become reluctant to pass these bills quickly and will use more debate and discussion to shape these programs, hopefully in a way to benefit business growth.

  • For now, I am still not ready to go "all in" into the stock market and prefer a "dip the toe" approach. Initially, I will buy calls on some stocks that I think may advance sharply with earnings reports. Also, I plan to buy ETFs for Brazil, Thailand and emerging markets. Finally, I will be updating my stock buy list, using my modified Unemotional Investor Growth system, to help identify potential stock purchases when I'm ready to make them.

    Disclosure: At time of publication, we own the iShares MSCI Brazil Index (EWZ).

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    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

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