It seems that many people seem to think the stock market is currently due for a correction. QE is winding down, the rally has been too long, the Fed is messing with money and inflation blah blah uncertainty etc. I see things happening differently.
Here's how it goes: Fed increases money supply with QE. Inflation ticks up. Eventually the record hoards of corporate cash feel enough inflationary pressure to get spent in spite of current economic uncertainty. As cash flows in, economic indicators will improve, giving positive feedback to other companies waiting to invest. This will snowball into record amounts of investment, both adding to inflation and increasing revenue for all those companies on the receiving end of the investments. The boom of our favorite boom and bust cycle. At this point I expect the Fed to put on the brakes, leading to the correction that everyone has been predicting since the start of this bull market.
So what's the point? There is a big rally ahead, and anyone trying to time the market to dodge the feared correction is risking missing the biggest gains. The best part is, that even if my reasoning is all wrong, I am still likely to be right about the rally. Check out historical charts of epic bull runs, and most of the gains are made at the beginning and end of the rally. This fact alone should discourage market timing, but that's for another post.
This year, like most of last year and unlike any time since the tech bubble, is full of buying opportunities for stock pickers with a long term outlook. The negative sentiment is only icing on the cake.
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