somple1: To answer your questions....
The stock market is a never-ending battle between the forces of fear and greed. When greed prevails, as it did in 1999 through March 2000, the aggressive growth stocks and the NASDAQ are the place to be invested. When fear prevails, as it does now, low P/E stocks, defensive stocks, and value plays (Dow stocks) are the place to be invested.
What to do now?? Listen to what the market is telling you.
It is saying that it does not like tech stocks now because they have zero earnings visibility in the face of an ongoing technology bear market. Thus, their P/E's are meaningless because their "E's" (earnings) are unpredictable and unreliable going forward. Other tech stocks are still overvalued and undergoing P/E contraction (stocks such as JNPR, BRCM, AMCC, BRCD, VRTS, etc.). For the time being, your money will be treated best by being in either money market funds, low P/E value plays, classic defensive sectors with steady, reliable earnings (healthcare, beverages & food), or sectors that clearly benefit in an environment of declining interest rates (regional banks, retailers, metals, etc.).
Although everyone is anticipating a recovery in six months, I do not think this is a "slam dunk". I am cautious that the tech bear market might spill over into the Dow, which is near its historic highs. If that happens, we will be in a full-blown recession.
I think that when the technology sector recovers, it will be a "U-shaped bounce" rather than a "V-shaped bounce". In other words, I am not afraid of missing the technology recovery -- there will be plenty of time (IMO) to re-enter the tech stocks and I will not repeat last year's mistake of trying to guess the bottom and be the first one in. I will either look for the beginning of a rebound in the chip sector, which I think will lead the tech recovery, or look for a NASDAQ dip below 2000 to tell me when to begin aggressively buying tech stocks. I am NOT saying that NASDAQ will go below 2000 -- only that if it does, I will be loading up the truck regardless of the sentiment. |
