After eight consecutive weeks of U.S. stock dominance, a few days of selling pressure should not come as a shock to anyone. In fact, it does not matter if the profit-taking is due to the worst retail report for Black Friday revenue since 2006 or if it is due to record-setting purchases on Cyber Monday; it does not matter if investors are turning skittish on fears of the Federal Reserve tapering in December or fears that they won’t. Simply put, stocks are due for a pullback.
How deep will the pullback be? Regardless of whether stocks are nearing bubble territory or whether they remain fairly valued, money flow statistics at WSJ.com show that block trading institutional investors are still buying heavily into weakness. The data suggest that money managers are either playing catch-up and/or unwilling to wait very long to buy the proverbial dip. In other words, it would be silly to anticipate much in the way of genuine weakness.
In accounts where I have excess cash, I am still adding some shares of broader market ETFs. I have been acquiring shares of funds like iShares Russell 1000 (IWB), iShares S&P MidCap (IJH) as well as Vanguard Dividend Growth (VIG).
I have also picked up some shares of several long-standing favorites, PowerShares Pharmaceuticals (PJP) and First Trust NASDAQ Dividend (TDIV). That said, early birds who look forward to potentially surprising trends in 2014 may want to examine the discount bin, and in particular these three attractive ETFs: