Ready to be a Buyer like Asia?
If you're contrarian investor, there may be an additional reason to jump into the market today. According to research from J.P. Morgan, institutional investors have become extremely negative, as hedge funds "essentially short the market," meaning that their expectation is that stocks will fall.
J.P. Morgan looked at the rolling 21-day beta of macro fund returns compared to the S&P 500 Index returns and found that the ratio is at an extreme level of -0.26. Research shows the last two times the ratio fell this low -- in September 2010 and February 2012 -- stocks rallied.In 2010, the S&P 500 climbed 26% in five months; in 2012, stocks rose 8% in two months. These signs the market is sending out make it an especially attractive time to "mine" for investment opportunity. In July, we began to see energy stocks and oil get recharged, as the energy sector in the S&P 500 was the second-best performer, increasing 4.17% and crude oil rose 3.68%. Unlike the start of an Olympic race, in investing, there isn't a signal sounded to let you know when to dive off the starting block into the markets. Just make sure your portfolio is poised to participate in the race for resources.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage. Frank Holmes reads: Psychology Today
Harvard Business Review
Systematic Relative Strength
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