Why Stocks Are Ready to Boom
Last month’s huge stock market rally is extending into February. The surge over the past few weeks reminds me of the Energizer Bunny.
It just keeps going, and going, and going…
But a lot of investors are missing out on this rally…
Lingering fears of an imminent European debt default are keeping a large percentage of investors out of the market and sitting firmly on the sideline.
Are you in that boat?
If you are, then listen up…
What I’m about to tell you may finally convince you to put some money to work in this market. It’s a little tidbit of information that should release the bearish shackles from your portfolio.
What is it?
A famously bearish economist just got bullish on the US stock market.
I’m talking about Nouriel Roubini.
That’s right, the notoriously bearish economist is now a bona fide US stock market bull. A few days ago he said the current rally ‘has legs’, and stocks should continue rising through mid-year.
Now, maybe you’re wondering… “Who the heck is Nouriel Roubini?”
Roubini is the economist who famously predicted the 2008 financial crisis and subsequent stock market crash. In the years prior to the meltdown, Roubini warned of a US housing market collapse, recession, and stock market rout.
Of course, he rose to stock market super-stardom as his predictions came true. His name is now synonymous with worst-case scenarios and dire economic predictions. What’s more, his consistently gloomy economic forecasts earned him the nickname “Dr. Doom”.
But now Dr. Doom is singing a different song…
Roubini’s consulting firm, Roubini Global Economics, now recommends being overweight US equities. In other words, he recommends owning stocks over any other asset class. And according to a recent CNBC article, he prefers technology and agriculture-related stocks.
So what’s the deal?
Now that one of the most bearish economists in the world has suddenly turned bullish, should you start buying stocks hand over fist?
First of all, let me say I agree with Mr. Roubini- stocks are the place to be right now.
But I disagree with his timing…
Dr. Doom is late to the party this time around. Stocks have already rallied hard over the past month. As a result, broad market indexes are trading at last year’s highs.
Take a look at this chart of the Dow…
As you can see, the Dow’s trading just over the 12,800 area. Since that’s an area of strong technical resistance, we’ll likely see some profit taking soon. Of course, that means stocks should reverse course and head lower in coming weeks.
Now don’t get me wrong. I don’t think stocks are about to crash or move dramatically lower. But I do think markets are overbought and we’re due for a pullback.
So what should you do?
If you bought stocks like I recommended in late December and early January, don’t be afraid to take some profits at these lofty levels. The recent rally has been nothing short of extraordinary.
But don’t you dare sell everything…
After stocks consolidate January’s spectacular gains, I think Dr. Doom will be proven right once again. Markets will continue higher into spring and reward resolute investors with hefty profits.
Until next time,
– Justin BennettSource: Dynamic Wealth Report
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