Private investors may feel nervous about investing in the stock market.
After all, there’s been a drip feed of often-negative economic and geopolitical news for months.
But at least one multi-millionaire veteran stock trader is making positive noises and preparing for an imminent bull market – read on for more.
Bull markets tend to endure
And that’s exciting because a bull market is a period when a big percentage of stocks and shares rise for an extended period.
Bull markets tend to last for months and years, rather than mere days and weeks.
However, there’s plenty of negative general economic news around. For example, interest rates are still rising on both sides of the Atlantic, driven by efforts to curb price inflation.
Speculation is in the air that the US economy may plunge into recession. And if that happens, it’s hard to imagine the UK economy doing the opposite and growing.
But one key point to remember is the stock market is not the economy. And the two things tend to move independently.
Meanwhile — love him or loathe him — there’s no denying the uncanny accuracy of many of American trader Mark Minervini’s big market calls over the past 40 years, or so.
And last week he described the current market conditions as a “bottoming process”.
But he added that during a bear market, we often see a “shakeout” in some form when stocks and shares temporarily retreat.
And the “reason” is usually some “scary” news items that fuel negative investor sentiment.
From weak hands to strong hands
In the US right now, there’s talk of debt ceiling issues, inflation worries, recession speculation and negative Fed language, he said. And that all heaps onto the shoulders of investors who are already beaten up and worn out emotionally and financially.
Such conditions often lead to the final selling and mark the shift from weak hands to strong hands. And that tends to create the necessary impetus for a new uptrend, he asserted.
In summary, Minervini drew on his experience of nine bear markets and said: “It was always during these ‘scary’ times that bottoms formed and a great opportunity was about to be born.”
Meanwhile, billionaire investor Warren Buffett times his entry into stocks and businesses. And he does so by considering valuations.
He tends to buy when stocks and valuations are down and hold for years as sentiment and business prospects improve.
However, positive outcomes are never certain when attempting to invest in stocks, shares and businesses for the long term.
But when I consider Buffett’s style and marry it to Minervini’s observations, I can’t help being excited about the potential of UK shares. And that’s because weakness in stock prices and valuations now may provide the opportunity to shop for Buffett-style bargains.
Meanwhile, if Minervini’s correct about an approaching bull market, my purchases will have been well timed.
