This question is repeated daily and the answers vary, depending on whom you talk to.
The bottom-line is no one knows whether the market is preparing for a rebound or still has further to sink.
A good case can be made for getting on board now, even if the market has some more falling to do.
Here’s why: Both businesses and consumers have cut purchases back dramatically in the last six to eight months.
Much of what has been cut are non-essential items for consumers and inventory for businesses. This results in an increase in pent-up demand.
How many people do you know (yourself included), who have decided to hold off a major purchase, but will still buy the item when they feel more financially secure?
Businesses are in the same mindset of delaying as many expenses as possible, but making a list of items and services they need to purchase when their markets stabilize.
Businesses will likely lead the change from waiting to action. When business owners and managers get a hint that the economy is returning to some normalcy, they will push to expand inventory.
It is a rule of retailing that you can’t sell an item that is not on the shelve. While it may have been prudent to trim (or slash) inventory as the economy contracted, business can’t afford to be caught in an expanding economy without inventory.
Of course, if businesses guess wrong about when the economy is going to turn, they may end up with an oversupply of products that must me deeply discounted to move.
Here is the proposition: If you believe the U.S. economy has the resilience to bounce back and reduce the unemployment rate, now may be a good time to start stocking up on great companies that will have the means to take advantage of an expanding economy.
Understand that no one knows when the economy is going to bottom and begin a rebound. It may be months; it could be years.
If you can tolerate the volatility in the short-run, grabbing great companies at bargain basement prices may prove profitable for the investor with a tolerance for risk and a long-term outlook
