Last week, we discussed the rapid recovery of the “Big 3” indices, which bodes well for future returns. However, that does not mean the market won’t have a short-term correction to provide a better risk-reward entry point for investors to add exposure, writes Lance Roberts, editor of the Bull Bear Report.
As Mike and I discussed on the RealInvestmentShow, we are willing to remain patient before deploying cash: “The market remains overbought short-term, but it is not uncommon for markets to stay overbought longer than most expect. While we patiently await a pullback to increase portfolio exposure, that could be a while longer before it occurs.”
SDPR S&P 500 ETF (SPY)
A consolidation period that allows relative strength or momentum to cool off somewhat will provide a better buying opportunity than under current conditions. We already have sufficient exposure to the market to gain performance when markets rise, but deploying capital at these levels is more risky than I prefer.
Why could the market pull back? There are many reasons, including the ongoing supply/demand imbalance, the reduction of corporate share buybacks, and the continuing risk from tariff negotiations. With earnings season about to restart, there is also a risk of disappointment as the economy continues to slow.
As I noted on X recently, we are also entering into a seasonally weak stretch for equity prices, which could translate into a pickup in volatility. While it may seem the market won’t quit going up, remember it will. Patience is the hard part.
