Will the world implode? Will we see a repeat of 2008? Not this year. While the bears are mostly correct about the macro-economic picture and its adverse effect on the micro-economic revenue of corporations, they underestimate the coordinated determination of central banks around the globe. Not only do they have their collective act better together than they had during the systemic collapse of 2008, but they're willing to step in when corrections jeopardize their goals.
In other words, forget all of the talk about the
"pulling the punch bowl" or the eurozone breaking into fragments in 2013. Granted, the summertime rhetoric may heat up and risk assets may very well tumble into correction territory. However, the central banks (e.g., People's Bank of China, Bank of Japan, Bank of England, Federal Reserve, European Central Bank, etc.) will maintain or accelerate their stimulus. The consequence? Demand for risk assets will return.
Investors and traders are left to ponder the possibilities. A trader may be wise to "gamble" on the high probability of a correction by selling a large percentage of risky assets here... near the all-time market peak. The trader could purchase core index holdings at pre-set values that are %5, 10% or 15% below all-time intra-day highs. For example, a mid-cap enthusiast would look at iShares Core S&P Mid-Cap (IJH) for incremental purchases at 109.72, 103.95 and 98.18.
An investor may not wish to raise quite the same amount of cash for an event that, albeit probable, may not arrive for another six months or longer. He/she may wish to
emulate the portfolio that I provided in earlier commentary,
and slowly work toward a similar allocation of assets.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.