Staying Nimble in a Volatile Market

Market volatility has noticeably increased over the last 10 or so trading days. After grinding higher for months with low volatility, equities have seen numerous triple-digit gains and losses, as well as major intraday reversals in the past two weeks. The market seems a bit bipolar as equities seem to be drawn like a magnet to breaking through their 2007 highs on the DJIA and S&P 500 while remaining susceptible to major selloffs on any negative news (Italian elections, Fed comments, and the like). I believe an investor has to be nimble here. I also believe it is necessary to have certain investing rules to guide your actions in managing a portfolio while not being so rigid not to take advantage of special situations that might violate your overall philosophy.

As regular readers of my column know, I am more pessimistic about the prospects for consumer spending than the consensus. The expiration of the payroll tax holiday as well as high gas prices should have some significant impact to spending, which I don't think can be assessed accurately yet. I am deeply underweight consumer discretionary stocks as a result. However, I am keeping stakes in two retailers that I believe will be able to navigate this headwind....246 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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