Is the Stock Market a Buy, Sell, or Hold?

Over the last few months, I have received countless emails with this question.

People are understandably nervous about what the Fed is doing, and what it will mean for the market over the next few years.  And with talking heads shouting different positions from the rooftops, it can be confusing.

Stephen Moore wrote an opinion piece, in The Hill, where we suggested that we might see price deflation and that it could tank the economy. His solution?

He suggests taking the payroll tax to zero and having the Fed print the money to pay Social Security obligations.  In other words, he thinks we should be injecting more liquidity into the market to ensure that we don’t face price deflation.

On the other hand, you have guys like Peter Schiff, and dozens of others, that are saying we have already printed way too much money and there is no way to avoid Zimbabwe-style hyperinflation.

So what is it guys, are prices going to drop or shoot to the moon?

In the meantime, the market continues to trend up, despite a 730 point drop in the Dow on Friday.

Print more money, print less money…

Inflation, deflation…

The economy is in shambles, the stock market is making record highs…

All of these conflicting opinions and data points can be confusing for the Mainstreet retail investor/trader.

So people ask me what I think about all of it, and I say “trade the market you have!”

Some people get frustrated with that answer. But that is my honest answer.

From a philosophical point of view, I think it’s too much.  I was comfortable with The Fed and the government stepping in — back in March…

But at this point, they are buying bonds and ETFs, etc.  It’s too much.

Will it end badly?  Yeah. Sure. Eventually. Maybe. I don’t know when.  The Fed has been neck-deep in the market since the Great Recession, and until recently, things seemed to be trucking along.  That doesn’t mean it will keep going forever, but they kept it on track through 2019, and they might still surprise us and pull this one out too.

Will there be price inflation outside of the stock market?  Maybe.  If velocity picks up.   But there doesn’t seem to be right now.

But none of that matters.  What does matter is how you can make money in this market.

Because of the volatility and the possibility of a market crash, I don’t recommend buying for long term investing right now.

Valuations are off the charts, companies are staying in business only because they can borrow money at ridiculously low rates, and with COVID and the riots, there is far too much uncertainty to make any long term decisions.

We need to keep our eye on the short to medium-term horizon right now and trade small positions in and out of specific stocks.  And while we are trading small positions, we need to make sure we are using “safe,” well-defined leverage so those small positions can pay off big for us without risking big losses.

It’s exactly the kind of trade I talk about in my report about Mainstreet Derivatives.  A lot of retail investors get scared when they hear the term “derivative,” but there’s no reason to let it worry you.

I explain exactly what the Mainstreet Derivative is and how you can use it to help keep your risk low and your ROI high.

Just click here and you can read all about it.

To your success,

Steve

The post Is the Stock Market a Buy, Sell, or Hold? appeared first on Option Sensei.

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