Despite a few short-term bearish secondary trends that have attempted to bring this market down, the current Fed-inspired stock rally has sailed through each turbulent pullback.
The current optimism found among stock investors is ill-advised, however, as this current Fed-inspired rally is going to end badly.
Just look at this chart below showing the wild amount of leverage that stock investors are sitting on right now.
So, if it is true that the market is overdue for another sharp correction, then we should be asking ourselves a very important question: “When, exactly, will the next market correction occur?”
But any attempt to answer such an impossible question is nothing more than a fool’s errand. The only way to know — with a certainty — which way the markets will move tomorrow is to be in possession of insider information, which is illegal. Those who possess such information risk landing in the slammer for at least a few years.
WARNING: Since the 2008 economic crisis, the internet has become awash in poor economic advice from “armchair” economists who offer their most morbid prognostications based upon unique “inside” information. Of course, this “secret” information often comes at a steep price. But it can be yours for “just a small fee,” please. I am stunned by the economic misinformation that is being passed about and paraded throughout the internet each and every day. Sadly, many people take financial advice from such strangers, despite their poor track record. I strongly encourage you to take an inventory of your information sources online as we head into the rest of 2014. There are going to be numerous false predictions regarding the market’s demise. Those who understand how devastating the next major stock market collapse will likely be should take note as one simple misstep could cost a fortune.
But forget for a minute that making “market predictions” is a fruitless and impossible task. Even it were somehow possible, the massive market distortions created by the Federal Reserve’s inept monetary policies would render any market forecasts “dead on arrival.”
Don’t buy into the sales hype and the market opinion. Wise investors must learn to cut through the panic and the noise. This is admittedly difficult in our era of non-stop 24/7 news cycles. However, this balanced wisdom is imperative for those who desire to be good stewards of their finances.
I don’t know exactly “when” the market correction will occur. But I do know what I am going to do when the market changes direction. In many ways, that is just as important.
So, what about you? What’s your exit strategy? You should definitely have one if you are currently invested in the U.S. stock market. If you don’t, be sure to check back tomorrow when I will share a watch list of investments that I plan on buying when the market trend begins to shift lower.