Good evening, TSPwire Tactical Investor,
TrimTabs data shows that last week stock investors cashed out more then $11bln. The biggest outflow came on Tuesday when investors cashed out a net of $5.5 billion, making it the second-highest daily outflow of the year. Marginally good news is that this outflow was not as bad as the one that we had on February 27th. Stock sell-off that we observed on Thursday was also not as high as the one that we had in February.
Deja Vu? Not really. Even though it might seem that we observed usual market correction, the actual forces behind this decline were completely different. Markets reacted negatively to credit concerns driven by sub-prime lending markets which in its turn caused a reduction in liquidity in credit markets.
Is that a good time to pull out from stocks? No. Stocks are very attractively valued especially now after this correction. At the same time global economy and corporate earnings remain strong. We are moving into August – time when majority of Wall Street player are coming back from vacation. We expect problems with market liquidity to be resolved within the next few weeks and that potentially can build a very solid ground for stock rally in the second half of 2007.
What we will be doing next? Since our allocation exposed us to market sell-off we decided to stay in the market. That way we will take full benefit of market rebound. If you still have some funds on the side line now might be a very good time to enter stock market. (From editor: I know that on Monday I definitely will be buying more stocks in my brokerage account.)
As you already figured out we decided to stay at: 50% in I Fund, 30% in C Fund and 20% in S Fund.