Holding Back from Buying Stocks

Usually by this point of a market rally, I'd be jumping back into the market.  With the exception of my company stock, company stock options, one college 529 account, and a dozen small stock positions, we have have been out of the stock market.  So I've missed the 25% gain in the stock market since the October 2011 low.

So here's why I'm still holding back;

• Low volume market. The market indices are rising on low volumes.  That mean very little demand is driving the market up. Once this demand is gone the market will have difficulty rising.  For reference, investors pulled $137 billion from stock mutual funds during June 2011 through January 2012,
• Negative event potential.  The market is one major negative event from a significant decline. Possibilities included a sovereign default in Europe, spiking oil prices, and conflict with Iran, Syria or other middle east country. 
• Low business commitment.  Businesses are still hoarding cash and holding back on hiring.  Many  businesses have increased profits through cost cutting and are using overtime instead of hiring.  If businesses thought the economy was going to get better soon, there would be more investment and hiring.

So for now I remain on the sidelines instead of getting back into the market as I usually would.  I will also continue to cash in on the rising market by exercising stock options when my company stock reaches new 52 week highs.


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

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