BEHIND THE MONEY: 2009 - The Year Of The Trader
The profit and economic outlook is the cloudiest traders can ever remember and it may remain unclear well until 2009. Many believe we’re setting up for 12 months of volatile, trendless markets as the powers that be search to find the resolution that will make this bubble pop the least painful.
After the stock market’s crash in 1987 and the collapse in Japan in 1990, markets exhibited a kind-of "crash-and-churn" pattern: a monster sell-off followed by a decade of purgatory as the great forces at work during the prior bubble period are unwound.
Staring these kinds of scenarios in the face has many investors changing their gameplan, with even long-term believers suddenly finding themselves more in the day trading camp. 2009 is setting up to be "The Year of the Trader"
I'm going to "shorten my profit horizons, keep positions light and flexible and use options more as insurance," said Joe Terranova, chief alternatives strategist for Virtus Investment Partners in New York. "At the end of 2009, I will know if my year was successful if I hit a lot of singles and doubles, drew walks and kept my strikeouts low."
Find out on the show tonight just how Terranova, a FM regular, plans to play small ball next year.
TO BE SURE: Another scenario could take place. Barclays portfolio strategist Barry Knapp sees a second half recovery. By his estimation, profits will bottom in the third quarter, with the stock market anticipating that turn about seven months beforehand, as it typically has throughout history.
"If we are right that earnings trough in (the third quarter) and we are not dealing with a repeat of 2002, we believe the market could turn some time in" in the first quarter, wrote Knapp in Barclays 2009 outlook piece released yesterday.
In either case, it sounds like you’ll need to begin 2009 on your toes and not just buy stocks in January and store them away until December.
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