Use any weakness in the stock markets - something we have plenty of lately - to buy the stuff you regret you didn't pick up when the markets plunged early this year.
Major Canadian and U.S. stock indexes have turned in four losing weeks in a row. The view of some market watchers is that we could either float sideways or see more declines ahead, and then experience some gains later in the year.
"From current levels, we believe the probability of equities outperforming bonds and cash through December 2010 remains very high," Vincent Delisle, strategist with Scotia Capital, wrote in a report yesterday.
Summer is traditionally a rainy season for stocks. According to a handy guide to seasonal investing trends called Thackray's 2009 Investor's Guide, all the major North American stock indexes were down on average in both July and August during the period from 1998 through 2007.
Remember summer 2007? That was when the global financial crisis started to bite. Bank stocks plunged and a kind of investment called asset-backed commercial paper (ABCP) emerged as its first victim.
Last summer, the markets peaked in early June and then began a slow fade that turned cataclysmic in September.
In another commentary issued yesterday, technical analysts Ron Meisels and David Tippin said they have looked at their charts showing market volume and price moves and concluded that stocks will likely stumble.
They see the major indexes hitting a low in late August and early September, with Canada outperforming the U.S. market.
The question all squeamish investors have to be asking themselves is whether the indexes will plunge to the lows reached in March.
Messrs. Meisels and Tippin warn there will be a lot of anxiety about those lows being retested if the markets fall hard in the next while.
"However, a more likely scenario is a one-third or one-half retracement of the March-June advances and that the markets will find support well above the panic levels seen in early March," they wrote.
The market lows of March could turn out to have been the best buying opportunity some investors will ever see. The problem is in seizing such moments. It simply can't be done by many people because they're too unnerved.
This explains why there's about $70-billion sitting in money market funds right now doing pretty much nothing, thanks to low interest rates.
Money-market-fund investors are afraid the stock market will fall again and that's a legitimate concern.
The major indexes have dropped in the area of 10 per cent from their recent highs - one measure of a market correction.
Scotia Capital's Mr. Delisle tried to put some perspective on this recent weakness by pointing out that the S&P/TSX composite index and S&P 500 stock index are up about 30 per cent from their lows in March, even after the pullback.
He doesn't see much risk that the S&P 500 will drop much further, while the S&P/TSX composite could have another 3 to 5 per cent to fall. As for the reason that stocks are falling, Mr. Delisle sees it as being more of a breather than a symptom of a worsening economy.
Would further stock market declines be a good opportunity for those who missed out in March?
"I don't like the term missing out - if people are trying to catch a rally, it becomes a pointless game," Mr. Delisle said.
"But for investors who didn't take advantage of the chance to recalibrate portfolios - lower cash, lower bonds, add more cyclicals - this is an opportunity."
Here's how to prepare: Start a list of the stocks, exchange-traded funds or mutual funds you want to own and get ready to buy.
Mr. Delisle said three sectors that would benefit from an economic rebound are life insurance companies, industrials, and oil and mining companies (see chart for more details).
Don't obsess about getting in at the exact bottom for a particular stock or fund. Instead, think about averaging in, which means making a few staggered purchases so as to benefit if prices keep falling.
You also protect yourself against the risk of making a big buy and then watching the market tank.
Yes, the markets may tank this summer or in the fall. The possibility can't be discounted, so be prepared for it to take one or two years to see some real benefit from money committed today.
Investing will be a slog for the next while, but that doesn't mean it's not the right strategy to stock up right now
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