Major Stock Market Sell Off Warning, Investor Defensive Plays

Stock-Markets / Stock Markets 2010
Mar 27, 2010 - 05:00 PM

By: Money_and_Markets

Mike Burnick writes: Since Bryan is on vacation this week, Martin asked me to pinch-hit as a guest editor today. And it couldn’t come at a better time, because at present, the Weiss Capital Managementâ€* investment team is on high alert for a potential market sell-off.

We’ve had a nearly uninterrupted market rally over the past 12 months, but now we believe it’s time to play good defense … and take steps to help protect your gains. Let me explain why …

Naturally, the bulls are quick to point out the 70 percent surge in stocks since the March 2009 lows … they’ll tell you this is a sure sign the economy is recovering … and that we’re back to business as usual.

But don’t believe it! If anything, this rally should give you even more reason to be vigilant right now.

After all, stocks certainly can’t be considered bargains anymore. Based on measures of long-term price-to-earnings ratios, the S&P 500 is as much as 25 percent overvalued now. 1 [Editor's note: To learn more about a Weiss Capital Management strategy that's designed for both bull and bear markets, go here.]



Stocks have gone nowhere but up for over a year, and now they’re trading at expensive valuations, just like in 2007 … and, needless to say, you know what happened next …

Nevertheless, true believers in the recovery continue to ignore valuation while driving share prices even higher. In our view, the rally could come to a crashing end at any time.

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