The Week Ahead: Time For More Volatility?
Jeff Miller | May 27, 2013 02:16AM ET
The relentless market rally since the fiscal cliff was averted has left everyone expecting a correction, looking for an entry point – or both. This came to a sudden end last week. We can see this readily from Doug Short's graphic summary of the week's trading (see the Prof. Mark Thoma's current analysis of Bernanke and the center to appreciate the significance.
Investment fundamentals will eventually prove out, so the first two points are most important. Meanwhile, perceptions drive markets as we have seen quite often in the last few years. I warn clients to expect a 15% market decline at some point, even in good years and even when not justified by economic fundamentals.
I do not see an imminent change in Fed policy, so there is still some time. For the moment, market volatility provides opportunity to establish new positions, as I was doing last week.
The ultimate effect will depend on how many investors are heading for the exits. Many of the loudest in offering that advice cannot lead the charge for the exit, since they were never in the building!
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