Wayne Weddington
Former Senior Trader, Caxton Associates
Author of Do it Yourself Hedge Funds
A: No
Investors should get away from the ebbs and flows of the stock market right now. There’s a whole lot of volatility. There are factors driving stock movements that have a lot to do with other things than fundamental analysis. People don’t have any clue as to how close to a complete collapse of our capitalist system we came to at the end of 2008. Rallies do happen when there is a secular decline in the market. The best thing is not to be reactive to short-term stock performance. The best thing is to think about where the opportunities really are.
Certainly the health of the financial markets is tied to an economic recovery. But a lot of what you have seen as advancement in the sector has to do with a change in the accounting rules as to how these institutions mark their books. So, what was considered a loss a year ago is now potentially a gain depending on how they mark their own portfolios. Investors should look at some of these earnings reports from the financial sector with a skeptical eye. To distinguish between a market recovery and an economic recovery comes down to cash flow and earnings. I don’t think any economist would suggest that earnings right now are sufficiently robust enough to warrant continued advancement in stocks.
Where Weddington sees opportunities for investors: corporate bonds, art, metals, and real estate