Is It Time To Sell Stocks?

The stock market has been on a roll for quite some time now. The Dow Jones Industrial Average is approaching 13,000 and the economic outlook is looking better. The United States economy has added more than 200,000 jobs and the unemployment rate is down to 8.3%. There is more good news today about how the number of available jobs is at a three year high.Money is pouring into the market as investors are falling in love with stocks again. So, should you start piling fresh cash in the market?As a contrarian investor, I am always poised to do the opposite of what the general public does. I think that people are a bit too bullish on the market. Some economists and analysts are predicting double digit growth for the United States equities market. Stocks that I have owned and been watching like General Electric, Mittal Steel, Best Buy, Nike, and Hewlett Packard have all experienced huge surges upward. Even perennially beaten down financial stocks like Bank of America are finally breaking out. Stocks seem to be going up in every sector in the economy/

Time To Sell Stocks

I don’t think that the market is overbought but I do not think that investors should be putting fresh powder to work in this market. The market is not full of the deeply discounted values that existed just a year or two ago. You have to be really selective about what you buy right now since the market run up has been so wide. If you have a big gain in a stock that you have been holding for awhile, now might be the time to trim your position a little bit and take some profits. Remember the old Jim Cramer saying, “bears make money, bulls make money, pigs get slaughtered”.

I am not looking for a big crash like the one in late 2008 and early 2009 but I do expect a pullback. Remember that markets do not always behave rationally. When euphoria is running high, the market has a way of tempering expectations. There are still headwinds in the United States economy. Although unemployment rate is dropping, the labor market is still way below normal levels. The government could also step in and mess up the market rally with excessive deficit reduction and continued squabbling in Washington. Right now however, the economic recovery is taking place and slow to moderate growth should be appreciated.

While I would not run out and dump all of my stocks now, I would not be buying across the board either at the current time.

Comments

  1. avatar Buck Inspire says:

    Great take. Was Friday the beginning of the pullback? Should be an interesting week.

  2. Hey There!

    Great article. I’m not big on picking tops and bottoms, but I definitely think it’s good to know when it is good to buy, and good to slow down. Another phrase I love is “No one ever lost money taking profit.” Thanks for your opinion, it’s great to get others’ insights. Have an awesome week and upcoming weekend!

    Thanks,
    Timothy

  3. avatar Kody G says:

    I agree, too many people are bullish right now. And, even though we will more than likely see more growth in coming months, I can see a downturn late Q3 and early Q4. Maybe we are wrong, but I like the idea of selling now or in the near future to take profits while you can.

  4. I am in complete agreement with you on this. Earlier this week, I just posted an article on my blog about whether or not was a good time to build up my defense by switching around my asset allocation from stocks to more bonds. This is basically the same topic you present here. My hunch is that I feel the same way as you about many of the things you point out in this post. These sharp increases will not be able to sustain this type of growth for much longer. I’m not ready to declare another recession, but I also feel as though the markets could pull back.

  5. avatar Harm says:

    Hedging your bets, eh? The market might go down, except if it doesn’t.
    I love the way people pretend to be telling what the market is going to do,
    by predicting every possibility. And didn’t we see this article 2 weeks ago?
    (I might have seen a link to it from a different blog, I confess)

  6. If you own quality names for the long haul, pull backs are a great opportunity to pick up more. It you’re buying all the latest fad stocks, then trying to buy high and sell higher is probably the strategy.

  7. avatar Geoff says:

    I agree that a big market crash isn’t just around the corner, especially now that Greece has agreed huge debt write-offs with most of its creditors, though Greece does seem to be limping along almost week by week at the moment. How bankruptcy in that country would impact on the US market is anyone’s guess.

  8. avatar jordy says:

    For the past year I have been learning about investing in stocks. The mentors I have been learning from have referenced a saying: “sell in May and go away”. The month is on the horizon. Gary K did a statistical analysis of the statement over a very long period of time. The results were astonishing, when the gains of selling in May were compared to the gains of not selling in May. Based on what I’ve seen statically, I’d say that what you have stated in your article is true, we will see a pull-back.

  9. avatar Omar B. says:

    I think a lot of people get caught up too much with the overall stock market condition instead of focusing on the condition of individual companies. If you have a position in a strong company in which you can reasonably expect to be strong for years to come, then why sell? Another thing to think about is that if you sell your stock are you putting the cash into another investment that will earn you a better return than the existing one. Cashing out and simply sticking that money into a simple savings account earning .05% is not the right move in my opinion. I suggest that if you do cash out look for other types of investments that can earn you a decent rate of return on your money.

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