Everyone in Minnesota takes a summer vacation. Our kids get the whole summer off from school. I have some clients that you can’t tell if they are on vacation, working, or are not on vacation during the summer months.
I have no earthly idea if the great U.S. stock market run of 2013 is over. I read the comments from a lot of smart people who have been right about the stock markets for many years. Those people think that the stock market will remain good for the remainder of the summer.
The largest owners of U.S. stocks are institutional investors. These are the so called “smart money” people who run the mutual funds, pensions, and banks. The buying and selling of these large blocks of stock market assets have a great deal to say about the direction of the stock markets.
Institutional investors have been net sellers of stocks for the last several weeks.
Who have been buying the stocks that the institutional investors have been selling? Unfortunately, stock market investors like you and me. Retail stock market clients have been buying U.S. stocks like crazy over the summer of 2013.
If U.S. stock market history is any guide, when the “smart money” sells their stocks to retail stock market investors, the stock market advance usually comes to an end. Or at least the stock market advance slows down.
You should never cut back on your stock market holdings in anticipation of a drop in stock market values. You may be right once in you stock market timing, but you will never be right all the time about the near-term direction of the stock market.
There will be a meaningful stock market correction at some point. Like all U.S. stock market investors, I hope that stocks don’t decide to take the rest of the summer off.