Can Stocks Hang On?

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The Rude Awakening Monday, April 1, 2013 | 1030 Hours Can Stocks Hang On? April Fools: stocks might drop... or not. Move beyond irrelevant headlines... Plus: What’s in store for gold? Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner Stocks are up. The S&P even squeaked out new all-time highs before the first quarter officially came to a close last week. So Q1 2013 is finally behind us. Now comes the tricky part... The second quarter has been an absolute stinker for the past few years. The market hasn’t deviated too far from its script: big gains to start the year, then a spring correction. We’ve been over this. But of course, the media is jump-starting the new quarter with more unhelpful headlines like this one: “Stock market rally may lose steam” Well, of course it might. All rallies eventually do. But instead of giving you any shred of useful information, you’re left with the simplest of explanations with no substance: stocks go, they might soon go down. Whatever... Let’s try something relevant instead: “Following prior strong opening quarters, the S&P 500 has averaged a gain of 1.4% for the remainder of the year (median 5.8%) with positive returns in ten out of twelve years,” reports Bespoke Investment Group. Now we’re getting somewhere. Statistically, strong starts end with the market hanging onto the gains. But the rest of the year usually isn’t as impressive as the first quarter. So how do you attack the start of the new quarter? Two words: think defense. We’re seeing defensive sectors like healthcare and consumer staples take the lead in a big way right now. Both of these groups are outperforming the broad market by about 5%. As the second quarter kicks off today, here’s what you should do: 1. Take some of your speculative gains off the table 2. Hold tight to your defensive stocks Rude Numbers Targets, Predictions and Wild Guesses 1,569 is the new all-time closing record for the S&P 500. 5% separates the S&P and analysts’ mean forecasts, according to Bloomberg. Just in case you’re keeping track, this is the smallest difference recorded. The historical average is 14 percent. 12,135 is where you’ll find the Nikkei this morning. That’s the lowest the Japanese index has reached since March 8... $1,598 buys an ounce of gold today. Stuck in its range for now... 2 economic data points hit the airwaves after the morning bell — ISM and construction spending. Rude Trends When to Buy... When to Sell “Regarding the ‘gold hater’ email. I think you did an amazing job of calling the drop in gold prices,” writes a grateful reader. “I read quite a bit and you were the only one calling the price drop. You called a break out and all I saw was a triple bottom. Well done.” Thanks. For the record, I wasn’t the only person on the planet calling for gold to trip up where it did — but it was the minority opinion almost everywhere you looked. That’s what happens when investors become so accustomed to an asset class rising for years and years. They become complacent. Then, when a correction presents itself, they have trouble believing that it’s actually occurring. I don’t have a crystal ball. And I’m not sure what’s in store for gold five or ten years down the road. But we are definitely at a very important juncture this year. Gold’s performance over the next several months will give us clues to its long-term potential. I’ll keep you in the loop as new information presents itself... [Ed. Note: Send your feedback here: rude@agorafinancial.com or follow me on Twitter: @GregGuenthner] Ignore At Your Own Peril Today's Must-Read Links What happens when Hollywood meets Wall Street... 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