A few months ago I wrote the market was brutal and I think the current market has only gotten worse. There is still extreme volatility in the market and I don’t think anyone has a clue where the overall market is headed over the next six months to a year. I know I don’t.
There are just too many unknows yet to play out. Stocks rallied today after the government took over Fannie Mae and Freddie Mae but I don’t think this will lead to a sustained rally. In fact I think the market will react similarly to when the Fed cut interest rates so drastically earlier this year. The overall market, especially financials, will have a short term rally but then the reality of the credit crisis will come back into the picture and the market will sell off again. Until there is more certainty about when the housing market, the credit crisis, and the economy are going to improve I think you are going to continue to see a lot of volatility in the stock market.
I think the best way play the current market is to invest in stocks that you plan on holding for a while. Trading stocks over the short term (holding for a few weeks or months) is always very hard but it is almost impossible in the current market.
By the way, when did our government become the Robin Hood for the rich? The government seems intent on stealing from the poor (the average taxpayer) and giving this money to the rich (big financial institutions, etc.). The average American should be pretty pissed off by the actions our government has been taking to protect the wealth of the super-rich. I will touch on this in another post.