Tags: Goldman | Sachs | Sell | Stocks

Listen to Goldman Sachs and Sell Stocks Now

By    |   Friday, 22 June 2012 07:17 AM

Goldman Sachs issued a rare sell signal, publicly warning that the S&P 500 could fall five percent from recent levels. This is sharp reversal to Goldman’s March 21 statement that said stocks were a strong buy for the next few years.

Since then, stocks have fallen and now Goldman says that decline should continue.

Goldman is doing what Wall Street firms and politicians always do and is trying to have it both ways. No matter what happens, at the end of the year the firm will point to one of its forecasts and say they were right. That’s good for them, but what should investors do?

As usual, Goldman feels that investors should fend for themselves while the firm offers conflicting advice that probably helps them generate fee income.

In hindsight, Goldman will probably be right on both calls. Short-term, the stock market looks weak and it is probably time to reduce exposure to stocks, which means selling at least part of your position in stocks. In the long-term, years from now, stocks will be higher so investors should be ready to buy later.

As we saw in 2008, selling can get carried away. We face the biggest financial crisis since then but Europe is bigger than Lehman Brothers and the selling this time might be even faster than it was way back then. In the last six months of that bear market, stocks fell about 45 percent.

For now, low-yielding cash looks like the best investment option possible.

With that cash, you should be able to take advantage of Goldman’s expected once in a lifetime buying opportunity after the upcoming short-term decline in stocks.

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Friday, 22 June 2012 07:17 AM
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