As a Record Bull Market Stalls, Should You Buy, Sell or Hold?

If you have invested in the stock market, you have probably been delighted to be involved with a record bull market. However, talks of trade wars, tariffs and the possibility that the Federal Reserve may increase interest rates as many as four times during 2018 have left many people anxious. With signs that the bull market is stalling, you may be wondering whether you should buy, sell or hold.

Do the Signs Indicating a Stalling Bull Market Mean You Should Sell, Buy or Sit Tight?

On the surface, this seems like a simple question. However, even the experts at brokerage firms and financial institutions cannot agree on whether the market is actually stalling, and among those that believe the bull market is fading, there is no consensus on whether you should increase your purchases, sell out or do nothing. Furthermore, your long-term financial goals, sources of income and annual rate of return on your entire portfolio must also be considered.

Some Analysts Believe You Should Buy During a Market Slowdown

When you buy a stock, you are gambling that the price will go higher. Therefore, buying at the lowest price can provide you with the best return, but you may need to hold the stock for several years before the price increases significantly. When there are signs that the market may edge downward, many investors become nervous and start selling their stocks. This can drive prices down, making it an ideal time to buy.

However, you must be prepared to hold the stocks, which means that if you need to recoup your money within a few months, you could risk losing your investment. It also depends on the type of stock you want to buy. For example, in an appearance on CNBC1, Paul Ciana, a technical strategist with Bank of America Merrill Lynch, stated his prediction that the bond market will rally. He also expects the price of gold to continue to rise.

Scott Wren, Wells Fargo’s senior global equity strategist, also believes that it is a good time to buy. Appearing on CNBC2, Wren predicted that the S&P 500 will reach 2,850 by the end of 2018, providing an advance of 6.6 percent for the year. He also finds equity markets to be particularly attractive.

Some Analysts Believe It Is Time to Sell

In an article posted at Investors.com3, Andrew Edwards advises that there are certain times when selling is the correct option. For example, if you own a stock that has spent a great deal of time near or at the buy point, you might want to evaluate the company again, sell the stock if your evaluation reveals weaknesses and invest the proceeds in a different stock. He also advises selling immediately if the price of a stock drops 8 percent below what you paid.

Most Analysts Believe You Should Hold

The stock market has always been volatile, resulting in prices that can fluctuate wildly. In an article appearing at MarketWatch.com4, Ryan Vlastelica points out that markets have historically shown annual increases nearly 75 percent of the time. In addition, studies have shown that investors who practice excessive trading reap much lower returns that those who buy and hold.

In an opinion piece published by Forbes5, John S. Tobey takes particular exception to the idea that the new tariffs are a warning to sell stocks. He notes that President Trump’s powers to institute tariffs without congressional approval are limited. His emergency tariffs are not permanent and could be ended or modified at any time. He believes that the tariffs will not stall the economy or lead to a bear market.

In an interview appearing on the website of The Motley Fool6, contributor Todd Campbell and analyst Kristine Harjes offered their perspectives on the stock market’s decline. Campbell noted that the S&P has dropped by 3 percent or more 17 times since March 2009, but it has always rallied. He reiterates that the best approach is to focus on great stocks as a long-term investment.

Your Decision Must Be Based on Your Situation

As you can see, there is no answer that is right for all investors. You must evaluate your financial situation, your willingness to take risks and your portfolio. You will want to consider how near you are to retirement, your other sources of income, your long-term financial goals and your debts. Evaluate the different stocks in your portfolio to identify any that are particularly risky.

If possible, you should consult a qualified financial planner. If you cannot afford the fees, there are free or low-cost alternatives. Some financial institutions provide customers with access to a financial planner, so check with your bank or credit union. You can also find help at seminars hosted by many libraries or online.

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  1. CNBC
  2. CNBC
  3. Investors.com
  4. MarketWatch.com
  5. Forbes
  6. The Motley Fool