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.