There is a time for everything, including entering and exiting markets. When the recession hit in 2008, investors made mad migration out of emerging markets and more riskier assets like small cap growth stocks. The fled to hide in the safe shelter of the US dollar and the ever safe asset: gold.
Now we are in the midst of one of the weirdest and uncertain economic times we’ve ever been in. It’s one thing to know when you are in a recession or at least beginning one. It’s another to not know where we stand as a global economy.
There has been a lot of talk about recover, but investors aren’t so sure. We hear of things like a jobless recovery, an economic upturn without job creation. How is that even possible? Or how can retail have sustained growth without consumers having jobs and disposable income.
So it may seem that a lot of the rally that we’ve seen in the stock market is really artificial and not really based on anything real. Yes the stimulus packages did stimulate the stock market, for just a bit. But we’re not so sure that it did anything, and the bill for the stimulus is coming due.
So, to the subject at hand: growth funds. There is a time to enter these funds and a time to get out. What time is it? No one really knows for sure.
The best time to get into aggressive growth funds is when the market is about to rally into a sustained season of growth and recovery. We’re not so sure we’re there yet.
Until I see some significant jobs and income growth, as well as a lower unemployment rate, I’m going to just assume that any uptick in consumer retail is due to stimulus money from student loans and temporary government contracts, pent up demand, or on credit cards. All of those sources of consumer spending is not good for the overall, long term health of the economy.
I would stay out of growth funds until you see a real reason to believe that the economy is on a road to recovery, which is a much positive jobs growth and lowering unemployment.
