So, you missed the rally?

A dramatic stock market surge to fresh post-recession highs has left many investors on the sidelines. Here's what they should be looking at.

By Anthony Mirhaydari Sep 7, 2012 3:08PM

Thanks to another dose of monetary policy stimulus out of the European Central Bank, stocks have bolted to levels not seen since early 2008. Gold and silver, which I've been recommending for months, are moving even more powerfully to the upside thanks to the combination of more stable economic data, higher inflation expectations, and a weakening of the U.S. dollar.


By all indications, the uptrend should continue for another month or so before the fiscal cliff/debt ceiling debate starts to be a concern. Yet most investors aren't participating. Here's why, and what those folks should be looking at now -- before it's too late.



Fund flow data illustrates just how fed up many of become with stocks after years of volatility and the particularly acute policy-driven environment we face over the next few months. According to EPFR, since 2011 investors have been heavily focused on bonds and have been steadily pulling cash out of stocks, especially developed-market issues.


In fact, in the week ending September 5 all EPFR-tracked equity funds lost nearly $10 billion while bond funds absorbed $3.2 billion. The total loss for U.S. equity funds was more than $8 billion driven by outflows from large cap ETFs, resulting in the second-largest year-to-date outflow.


Yet, over the two days that followed stocks jumped 2.4% and look headed for additional gains in the days to come.



The good news is that there is still time for people to get into the hunt. The bad news is that if they wait much longer, the uptrend will have matured to the point where the risk/reward ratio is no longer attractive. Already we've reached the stage were a wider and wider swath of the market is moving higher together: A feat that requires an incredible amount of buying power from the bulls. It's something that's seen in the middle innings of any rally. 


Today, I'm adding the Market Vectors Russia ETF (RSX) to my sample portfolio.


Early leaders, such as precious metals and the related mining stocks are beginning to give way to new areas of strength such as financials, emerging market issues, and energy/materials stocks. These are the areas new buyers should be focusing on. Examples include the iShares Brazil (EWZ), which is up 7% since I added it to the Edge Letter Sample Portfolio, and Bank of Ireland (IRE), up 5% since Thursday.


If you're just looking for simple, broad market exposure, consider the iShares Russell 2000 Small Cap Growth (IWO).


Disclosure: Anthony has recommended EWZ, RSX, IRE, and IWO to his newsletter subscribers.


I found RSX with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)

Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at anthony@edgeletter.c​​​om and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


Sep 7, 2012 3:54PM
"So, you missed the rally?"

Yes and I'm going to miss the bubble burst.

Sep 7, 2012 5:14PM

They are still trying to prove you can borrow you way out of debt and tax your way into proserity......

Sep 7, 2012 5:17PM

The buzz next week will be "QE3 already priced into the market, setup for big crash if Ben doesn't deliver".  Only those with nerves of steel will stay in.  Ironically, "nerves of steel" investors are the only ones left.  The masses are foolishly sitting on cash, waiting for inflation to destroy thier net worths.






Sep 7, 2012 3:23PM
Sep 7, 2012 4:31PM
I've got my money in Europe, they are debasing their currency faster then the FED to pump up stocks and prop up failed spendthrift governments.
Sep 8, 2012 12:56AM
Not at all. My portfolio went up about $50k last week but it went down $50k the week before.
Sep 8, 2012 12:48PM
63 percent since 2008 is a little over 15 percent return every year since the crash. Might be time to take everything off the table after QE3 is announced before Tony and his buddies at MSNBC start shorting the market. Very scary that nobody including Tony knows what will happen after global QE3 and the Republicans appear to have no plan at all for the debt we are in other than taxing middle class.
Sep 7, 2012 8:10PM
Listen to Anthony little sheep.  Listen to the corporate paid shill.  Obey...don't look behind the curtain where you will see the real "market" (i.e.- record low volume, record food stamps, record un and underemployment, mutual fund outflows by the billions weekly for almost 2 years, europe NOT fixed, all HFT trading, shall I stop now?)
Sep 7, 2012 4:57PM
LOL to everyone who missed the rally

Good luck holding onto your money, what are you going to do invest in housing lol....Please tell me how you are going to make 65% returns on your money like i have in the stock market lol

Everyone holding their money were the same bears saying the market would collapse and now they are salty...guess what it didn' least admit when you were completely and utterly wrong
Sep 7, 2012 4:13PM
your pretty smart anthony i think i'll listen to your guides thanks
Sep 7, 2012 3:28PM
Keep in mind that if and when interest rates begin to go back up that this will be bad news for small cap stocks but everyone should be looking at blue chip stocks with a global reach like DISNEY that can survive what lies ahead. Either the debt ceiling goes up or the President will begin cutting the defense industry even deeper than the $1 trillion in cuts that will happen in January if Congress does nothing. If this do-nothing GOP Congress is still in place in December that is exactly what will happen. We are broke. No matter who wins somebody is going to lose their job to pay off this debt but with Romney you are guaranteed to pay more taxes if you are middle class. VOTE OBAMA !!!! BULL MARKET!!!!!!!
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