Aug. 11, 2009 -
PRLog -- Despite the recent 5 month near-straight up rally, Michael Stewart, Managing Partner of Bull Valley Financial, says for investors to remain cautious and hedge current positions to maintain the recent gains. "My firm has been dead on from eary 2008 through now on the extended economic woes and the poor market returns related to them. In the summer of '07 we counseled clients to 'get safe' and moved or hedged nearly all of their market related assets. We continued this throughout the fall '08 and into Spring '09 calling for S&P 600 which we nearly hit. Recognizing oversold conditions we recommended re-entry mid March with tight trailing stop losses to enjoy the ride and have an exit startegy on a turnaround."
Mr. Stewart adds "Where we are now is ahead of our ski's from a valuation standpoint. Clients in equities need to retrench to hedge recent gains. We have received 3-4 years of expected in returns in 5 months. I'm of the opinion that you need to be tactical and staying too long, pigs get fat and hogs get slaughtered. We've added selling calls/buying puts and averaging out of extended positions. The entire rally has been one of 'Hope' and government inspired bailouts not sustainable economic recovery. Once the government steps away from the punch bowl and banks and consumers can no longer count on handouts, the parties over." Mr. Stewart's comments are not all doom and gloom, "My thoughts are that we see a significant pullback over the next few months giving back 50% of the recent rally, more in some of the emerging markets, after that we begin to build a base for recovery." Bull Valley Financial and it's associates do not see improvement in housing as the increasing unemployment will only add to the foreclosure, default and credit issues already facing banks and consumers. The thoughts are that the prolonged housing issues will continue to restrain any true economic growth. "Be prepared for a 'renters nation' for the next 3-4 years as consumers and banks deleverage themselves from bad debt and rebuild their personal balance sheets." Mr. Stewart's S&P 500 target for year end is 800, approximately 20% below where we are today.
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