The S&P 500 has grown 12 percent in Q1, 2012. Is the market headed for a correction or are the indexes fairly valued?
If Brian Jacobsen, chief portfolio strategist at Well Fargo Advantage Funds, is to be believed, it’s unlikely we will see a sharp correction. Instead we may witness a pullback, similar to the one we saw at the beginning of the week.
As the saying goes: April showers bring May flowers; there can be a pullback due to worries over the sustainability of profits and the political developments, especially this being an election year, but a 10 percent correction seems unlikely. However, he thinks the S&P 500 can touch 1,450 after the election gets over in November.
Brian is not rebalancing his portfolio in a big way; rather he’s trimming his winners and reinvesting his profits in high conviction losers. This rotation of selling the winners and reinvesting in the losers is going to pay off, he says.
For example, Financials have done well in the last three months, and investors shouldn’t be worried to book some profit and invest in a sector that has underperformed but shows strong potential, like the healthcare sector or consumer staples.
Also too many investors in the US are worried about US growth and not focusing on the some of the growth coming from the emerging markets. You can watch the video here.
My personal view differs in that I believe that there is the potential for a sharp correction depending on the news coming from various global hotspots. The timing, of course, is the big unknown, which is why I prefer having an exit strategy in place no matter how bullish Main Stream Media interprets events and data points.
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