This week’s rally within stocks and exchange traded funds (ETFs) has tempted many investors to start looking for places to put their money, and the search is going beyond banks and the financial sector.
Wall Street tends top focus on the banks and the policy makers in Washington, as they anticipate their next move. Investors have gotten creative and are searching for possibilities in sectors such as homebuilders and biopharma. Jeff Cox for CNBC reports that mergers and acquisitions could increase through the year as the government seeks to free up more capital that can be used by bigger companies and dissolve the smaller, less productive ones.
The expansion will move globally, but not to the IPO levels of before. There are great valuations out there, however. We’re going to see more global expansion and integration of companies, where the expansion tended to be more nationalized than in the past.
To make sifting through the M&A trend easier, ETFs offer a safer play and take the guesswork out of single stock picking. Choosing ETFs that cover the sectors where M&A activity will abound gives investors an opportunity to participate in the trend while reducing the risk of getting burned by individual companies that do bad deals.
Are you ready for a rebound, if this is it? Whether it is or not, there are ways to be prepared.
There are trillions of dollars sitting on the sidelines right now as investors ride out the storm, but when the bottom hits and a rebound begins, investors need to be mentally prepared and ready to go.
Most funds are far below the 200-day moving average, meaning it would be a long wait before a signal to buy is reached. We haven’t been so far below the long-term trend lines in decades. As a result, we have a short-term plan for getting back into the markets if the rebound is real:
- When a fund crosses above its 50-day moving average, put 25% of the value of your portfolio.
- When the fund goes up 5%, put another 25% in.
By the time this happens, the 200-day moving average should be well within sight.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.