Buying Into Fear And Uncertainty Is A Winning Strategy
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There is a chance that investors are underestimating how much volatility the markets will see in 2013. At the end of 2012 companies cut back on spending in the face of policy uncertainty, and there's still a lot of work to be done in Europe. Moreover, geopolitical risks and a slowdown in emerging markets could "spark another elevated volatility regime". But they say there is opportunity in volatility.
"Investing in stocks exposes investors to painful volatility from time to time. Rather than fearing periods of market stress, investors should look to understand their root cause and be ready to act accordingly. Volatility has been tame in the early days of 2013, but there are events on the horizon (some known and others unknown) that could lead to a market sell-off. The challenge of buying into periods of market pessimism is overcoming our fears that things will get worse (i.e., another 2008 lurking around the corner).
"However, over time buying into fear and uncertainty has proven to be a winning strategy— especially in periods like today where there are not excesses built into the economy. We do not know what surprises the markets have in store for 2013. However, by being prepared, we may be able to take advantage of opportunities as they are presented."