Looking at company earnings, Stovall calculates that the S&P 500 has reached their estimate for 2014, but he also estimates that the markets still have another 7.5% to go over the next 12 months.
Nevertheless, there are some good reasons to sell or at least trim an equity position. For instance, investors who have reached their target investment goal can dial back equity positions and shift over to income generating options. Additionally, after the recent rally in stocks, you might be overweight equities. Investors can also rebalance their portfolios to put their overall equity and fixed-income allocations back in line.
Investors who are more risk-adverse by nature can also consider letting their cash levels build up instead of investing into the markets. This way an investor can also save up for a rainy day and buy at the end of the next bear market.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of SPY and QQQ.