The Market's Latest Victim: 'Buy-And-Hold' Strategy
"If the time frame is 18 months to two years I'm very bullish. If the time frame is this afternoon your guess is as good as mine, but unfortunately that seems to be what people are looking at," says Randy Carver, president of Carver Financial Services/Raymond James in Mentor, Ohio. "I think the public is just kind of beat down, at the point of capitulation. People are just resigned to the fact that it's bad."
Some Companies Take a Hit
One case in point for the strange logic in trading is Caterpillar.
The Dow component and construction manufacturing behemoth would seem well poised for a good year considering President Obama's stress on infrastructure programs in his stimulus plan that the House recently passed.
Yet Caterpillar shares have been under intense pressure, dropping about 9 percent this week, as it announced 22,000 layoffs and Goldman Sachs added the company to its conviction sell list. Under other circumstances, such a stock might be considered a solid long-term hold, but with all the uncertainty in the economy it's being sold off aggressively.
"Everybody's afraid to trust the fundamentals. Everybody's afraid of what these numbers are going to mean," Boyle says. "You have this continued slew of layoffs as the earnings come out. Everybody's getting used to lowered expectations but at the same time they're throwing in 'we're laying off another 20,000 people.' That hurts the economy."
For protection against the whipsaw turns in the market while capitalizing on a long-term bullish philosophy, Carver is playing a battery of ETFs that follow individual sector movements as well as gains in the broad market.
He likes several of those in the iShares family: the S&P 500 Index, the Russell Midcap Index and the S&P SmallCap 600 Index, and outside that group, the Vanguard Total Stock Market, which essentially is a play on everything, even Over The Counter companies not listed on the major exchanges.
Such enthusiasm isn't universal, with a level of caution also prevalent that accompanies technical trading.
With all of the obstacles facing the market, regaining investor confidence will be critical before buy-and-hold positions become popular again.
"You need that confidence, that psychology to be restored," Schultheis says. "We need to know government's ahead of the curve, that they're not playing whack-a-mole, that we can now act and spend in a more normal fashion because we have a more reasonable expectation of what we see coming down the road. Then and only then will there be an opportunity for a sustained advance in equities."