Stocks are up about 45% from their lows in March. It has been a great summer for investors who needed some good news after a tough few years.
How long will this stock rally last?
A few of the institutional investors seem to think there is a correction on the horizon. Perhaps a 10% - 20% correction as investors take some profits and the stock prices get more in line with their actual values?
On the other hand, people like rallies. As people see the stock market rising quickly and hear media reports about our improving economy, many people are deciding it is time to get back into the market. They would have done better if they would have gotten into the market when it was hitting rock bottom a few months ago, but that is not how the psychology of most average investors works.
Personally, I do think there will be a correction as the market seems a little overheated right now. Consumers are still not speding very much so corporate profits will probably continue to be depressed for a little longer. Certain sectors are doing well, but a full recovery may still be months away. Overall, I think the market will continue to rise long term, but we may see a small dip the rest of this year.
Stocks pulled back a little last week. This might be some of the profit taking as stocks have been a little too hot lately. The next few weeks will see a few big reports about the economy. The direction of the next few weeks will depend on how these reports look and also on how overheated investors think this rally has been.