December 1, 2017 update:
Do not follow the herd, especially if it appears panicky. You’ll just run off the cliff with everybody else. If spent all your cash because you thought this correction would be like previous ones that were short in duration, just act like Warren Buffett and be patient. All good things come to those who wait. Amazon and Facebook both sold off earlier this year. Jumping out of them when they did just cost you money. They soon bounced back and if you held on to them rather than sold them you made more money.
There will always be noise out of Washington but the domestic and global economy is strong and getting even stronger so there is no recession. Earnings were generally good and are continuing to improve. Economic data support continued growth and expansion. Which matters more in the long-run, short-lived political noise, a tax bill, or strong economic and company fundamentals? You know the answer so invest accordingly.
In the mean time, profit taking and panicky selling will get over with when it does. This will only be good for the market. Be ready for that.
December 27 update:
Positioning for next year is the theme. Mostly, commentators favor tech and financials. Zacks estimates 4 S & P 500 sectors may double in 2018. These are Energy, Materials, Rate driven financials, and information technology. The most attractive sectors according to Zacks forecasters are Information technology, Consumer discretionary, Materials, Industrials, and Energy. Funds and stocks in my portfolio that are consistent with these areas are FTEC, WLK, FAS, BA, CAT, SEDG, NAIL, DXC, PAYC, HASI, CRM, TXN, SOXL, NVDA, VMW, SKYY and FAS. For greater stability I also hold a lot of STZ, which fits into consumer staples and consumer discretionary quite well. You should check your own portfolio for diversification, stability, and emphasis. The stock market always looks ahead and so to should you.
It is likely that tax cuts that lead to increased earnings and stock buybacks during 2018 will reduce PE ratios (the increasing in earnings) and make the market look less overbought. Scarcer stock will make the market want to go up for that reason as well. The US economy is steady with increasing rates of growth and earnings which supports stock prices. The bull market is held with skepticism by many which is also good because it means the bull has more room to run. Invest accordingly.
Some general principles are to stay diversified among economic sectors (eg., tech, finance, industrials, international, money) so that any type of rotation out of one area such as tech is offset with buying into other areas. Keep some cash on hand for dips and pull-backs. As opposed to a rotation, significant sell-offs might be hedged by using cash to buy TZA or TVIX. Good investing and Happy New Year!
