This continues to be and will always remain the $64,000 question when it comes to investing as there are plausible arguments for both the bulls and the bears, especially in the current environment. The bears will argue that geopolitical risks in Europe still exist, inflation is starting to accelerate, and bullish sentiment is running high. Bulls will counter that there are more skeptics about the markets and economy, the economy is finally gaining traction, and earnings will likely continue to improve over the year.
The hard part is deciphering which opinion is correct as we can see validity in both arguments. Thus the current market environment creates a double edged sword.
So how does one play this market, given the confusing but equally valid messages being sent by the market? We suggest a more cautious approach as we do believe eventually there is going to be a decrease in price momentum and markets will enter a corrective phase. It is important to be extremely selective and wait for opportunities to arise.
Bottom line is there are always varying degrees of risks and rewards. Sometimes but very rarely the decision is easy. However, most of the time, such as the present, it's not as clear. Right now we believe there is a higher level of risk.
Investing in the "new normal" of markets and government backed economies requires a great deal of patience - knowing when to pounce an an opportunity and when to conserve energy and wait. The time to pounce is when the likelihood of reward is the greatest and stacked in your favor.
However as we all know things change very rapidly in our technology driven society and information moves at the speed of light. It is important to keep an eye on the data (both positive and negative) looking for clues that will help tip the risk/reward scale to favor more reward and less risk.
