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AlphaProfit Outlines Strategy for Cash-Laden Investors to Re-Enter Equities
Witnessing the S&P 500 soar since March, several investors who have parked their cash in safe havens are looking for ways to re-enter the equity market. AlphaProfit Investments outlines an investment strategy for cash-laden investors.
By: Uma Maheswari
There are reasons to fret over. There is concern that the Federal Reserve’s near-zero interest rates may trigger inflation. Gold recently broke through the $1,100 per ounce mark. Corporations continue to lay off workers. The unemployment rate stands at 10.2%, the highest since 1983. As such, investors are concerned over the possibility of the stock market reversing course and falling below the March 2009 lows.
Sam Subramanian, Managing Principal, AlphaProfit Investments believes the odds of equity prices breaking through the March 2009 lows are fairly slim for the following reasons:
• The U. S. economy is showing signs of improvement. The gross domestic product expanded at a 3.5% annualized rate in the third quarter compared to the 6.4% decline in the first.
• The Conference Board’s index of leading economic indicators has increased for six straight months. The most recent reading has put the LEI's six-month growth rate at the highest pace since 1983.
• There are early signs of improvement in the job market as well. The monthly average of initial jobless claims has fallen to 523,750 from 657,250 in April, suggesting the rate of layoffs is slowing.
• The number of temporary hires has also ticked up for three straight months, showing that employers are now looking to add to payrolls at least on a temporary basis.
• Gold has surged due a weakness in the U. S. dollar. Inflation expectations aren’t running out of control. The implied 10-year inflation rate as based on Treasury yields is a tepid 2.1%.
Subramanian says, “The more likely scenario for equities is one where prices move sideways for some time before the bull starts to charge again. Cash-laden investors can use periods of weakness to get back into high-quality stocks in incremental steps.”
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AlphaProfit Investments is an independent investment research firm located in Sugar Land, Texas. The firm publishes subscription-