Triangle Investors

Stages of a Rally November 12, 2009

Posted by Andy Robinson in : Market Research , trackback

The government may be able to keep the stock market party rolling a few months longer with more deficit spending and dollar destruction, but we’re clearly in the later stages of the amazing rally off of the March lows. I’ve found an interesting article that describes the typical stock market rebound after a crash, which they break into three stages. While one should always allocate a portion of money to stocks, I’d recommend over-weighting cash at the moment. I’ve long recommended owning precious metals and commodities as protection against government easy money policies, and would still encourage adding more on dips. When the Fed is forced to remove its stimulus due to deficit restrictions or accelerating inflation, we are likely going to sink back into recession again. If that happens, the stock market will plummet significantly since stocks are by no means cheap by any valuation method.