>Historically May brings cracks in the proverbial wall of worry. Equities have a contrarian bent to go up when on the surface things look bad. Political infighting, fear of inflation and Mideast turmoil has been the theme this month causing investors to still sit on the sidelines when the markets are undervalued. One of my indicators I watch, provided by Don Hayes of Hayes Advisory, the psychology of the market which suggests complacency in its highest form. The amount of cash sitting on the sidelines is still higher than it was at the 2002 bear market lows, and the highest it has been since the early 1990s. Currently the reading of cash to the S&P is 100.2%. What that means is that there is almost precisely enough money in the economy to buy all of the S&P 500 companies outright.
Various indexes are reaching an oversold level that we have not seen for several months, including muni bonds, commodities and currencies. The challenge to investors is if they have the wherewithal to take advantage of these windows of opportunity. We have raised some cash starting in early May due to relative strength fading in some sectors and locked in some profits, but we will be fully invested by the end of next week; if the market provides us the opportunity by correcting a little further.
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