Yahoo! Summer Portfolio Management Ideas
The U.S. economy is slowing, fears of a debt-ceiling debate are rising and Europe is a mess. Yes, it's beginning to look a lot like summer 2011.
Last summer, you'll recall, major averages fell nearly 20% from late July until bottoming in early October. Recent market action has some pundits calling for a repeat, if not something worse, especially as the Fed's Operation Twist expires on June 30.
"Things could potentially get worse" but, for the moment, the S&P (GSPC) appears to have held support near 1300, says Lance Roberts, CEO of Streettalk Advisors. (In early trading Thursday, the index was testing that level yet again, recently down 1% at 1300.64.)
If the 2011 pattern holds, Roberts says May's swoon should be followed by a bounce in June, which would give investors an opportunity to raise cash.
"Generally after big sell-off you get one good bounce, another sell-off and that's where you're going to find your buying opportunity, most likely sometime between August and September," he says.
If and when the S&P breaks 1300, Roberts expects the index to fall into the 1200-1250 range. "If we get below 1200, it's a totally different conversation."
They may be self evident but Roberts cites four major "headwinds" facing the market this summer:
•Greece and the EU crisis.
•The 'fiscal cliff'.
•Debt ceiling debate.
The first three issues have been discussed at length in recent segments (see links above) and Thursday brought another round of weaker-than-expected data, including: a downward revision to first-quarter GDP (to 1.9%), lackluster ADP employment data and rising jobless claims, as well as a disappointing Chicago Purchasing Managers Index.
"Be careful here," Roberts says, advising investors is to "treat your portfolio like a garden," by pruning the winners and treating losers like weeds. "If I don't take my weeds out of my garden they'll eventually take over the garden."
Investors suffering through big losses on big-cap names like JPMorgan (JPM), Morgan Stanley (MS), ConocoPhillips (COP), Research In Motion (RIMM) and, yes, Facebook (FB) would be wise to heed such advice.