Market dip: What to buy now
Today's Financial News - Posted September 24, 2009
The equities market is in the midst of a quick downturn. Will it last? Or is this the buying opportunity you have been waiting for?
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It is a big day for the greenback. As the G-20 fight its way through the protesters in Pittsburgh, all eyes are on the dollar, especially the 2.6 billion or so eyes inside China’s borders.
By now, if you have been paying attention, you know China’s economic future depends on the value of the American dollar. If you need a quick refresher on the situation, read this.
With nearly a trillion dollars in its reserve accounts, Beijing needs the dollar to remain dominant. If not, its financial future looks dim.
At this week’s G-20 summit, there is bound to be some public discussion – and even more closed-door debate – over the fate of the dollar.
As Uncle Sam puts more and more greenbacks on the market, fewer investors will be willing to pay a premium for the currency, especially with interest rates in ultra-low territory.
The nation’s newspapers are filled with stories about the fate of the dollar today. The Wall Street Journal, Financial Times, and even Time are running articles on the situation.
Looking out for you
One thing the nation’s rags are not discussing is what it all means for you, the everyday investor. What should you be buying? And what should you avoid more than a roomful of swine flu suffers?
Looking at the broadest of economical measures, risk tolerances are on the decline.
The markets have made a resounding and widely unexpected move over the last six months. With the S&P 500 rising nearly 60% from the March lows, traders are eager to lock in profits and move to the security of long-term safety plays, like commodities and Treasuries.
In fact, a look at the Treasuries markets over the past five trading days shows declining interest rates. In other words, even as increased inflationary looms on the horizon like a massive enemy warship, investors are still unwilling to go “all in” on the equities market. They are still want the security of Treasuries.
As the Treasury market gains a bit of strength today, forcing the dollar up a bit (it won’t last), the commodities market gave back some of its recent gains.
Gold is back below $1,000 per ounce. Crude is below $67. Silver’s down. Copper’s down. And platinum is down. A dip like this is a fantastic opportunity to jump into the commodities market if you have not already made the move.
I sound like a broken record lately, but I cannot overstress the profit potential that lies within this sector. Over the next twelve months, commodity prices will rise significantly.
Bank on it
As safety becomes a dominant theme once again, investors are going to back out of their financial sector positions as well. The nation’s banks, companies like Citigroup (NYSE:C), Bank of American (NYSE:BAC) and even General Electric (NYSE:GE), are once again going to be put under the Street’s microscope.
If you have significant exposure to this sector, keep a close eye on it over the next few weeks.
As we put the wraps on the third quarter next week, we close the books on an ultra-important three months. Investors are eager to put some real figures behind speculation of an economic turnaround.
Investors are wise to back out of high-risk plays that are threatened by a lack of consumer spending. Commodities are a strong bet and so are biotech plays, which rely more on pipeline development than economic cycles.
By the time October comes to an end, we will either have seen the Dow hit 10,000 or the critical index will be printing with an 8,000 handle. While my take is bearish, there are plenty of investors taking the opposite trend.
One thing is for sure, the action over the past two days shows the bulls are starting to search for reasons to continue their advance. The big question is will they find it?
Next Article: TFN eNews 09/24/2009: Will the market bounce back?
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