Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is warning that the chances of a major correction in stock prices are increasing.
“The great American writer Mark Twain once said that when you find yourself on the side of the majority, it’s time to pause and reflect,” says economist and lead contributor Michael Lombardi. “For stock market investors, the time to pause and reflect is now, especially in light of the fact that the once-unstoppable S&P 500 is in the red this year and has lost roughly four percent of its value since the beginning of April.”
Lombardi explains that whether it fits the Wall Street definition or not, the fact of the matter is that the key stock indices are experiencing a correction and investors should take notice. Despite the fact that fourth-quarter 2013 results were dismal and the underlying fundamentals are weak, individual investors and institutions continue to be bullish on the key stock indices; this suggests a market sell-off is nearing.
According to the National Association of Active Investment Managers Exposure Index, fund managers are heavily exposed to key stock indices, with 90% of their portfolios invested in stocks. The exposure to the key stock indices has been high since the beginning of 2014, but at the same time, stock prices have been on the decline. (Source: “!NAAIM,” StockCharts.com; http://stockcharts.com/h-sc/ui?s=!NAAIM, last accessed April 15, 2014.)
Pension funds, the so-called conservative investors, have been increasing their exposure to key stock indices. The New York State Teachers’ Retirement System, one of the biggest pensions in the U.S., invested 41% of all its assets in the U.S. stock market. (Source: “Annual Report Fiscal Year 2013,” New York State Teachers’ Retirement System web site, June 30, 2013; www.nystrs.org/main/library/AnnualReport/2013CAFR.pdf.)
“It seems risky for a pension fund to invest almost half of its client’s retirement money in the stock market. It harkens back to 2007, when the underlying fundamentals of the U.S. economy were both weak and being ignored, overshadowed by the white noise suggesting the key stock indices would only go higher,” Lombardi adds. “Instead, we witnessed one of the worst stock market sell-offs in history.”
“Many indicators we follow suggest a market sell-off is closer than many anticipate,” Lombardi concludes. “Instead of exposing your portfolio to key stock indices like some pension funds, active fund managers, and other individuals are doing, now is a good time to preserve capital.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Profit Confidential, visit www.LombardiPublishing.com.
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Name: Wendy Potter
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