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Falling Stocks Don't Equal Bargains

In a down market like this one, land mines abound.

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A falling stock market like this one poses a dilemma. On the one hand, none of us wants to find ourselves following the crowd, selling when everyone else is selling, too. Who wants to be called a bandwagon-rider? On the other hand, we also don't want to fall in love with our loser stocks, or buy stocks just because they've fallen from their peaks. Being contrarian for the sake of being contrarian is just as foolish as following the crowd.

 

Unfortunately, I don't have an answer as to whether the stock market is undervalued or overvalued. But I do have two observations, both of which make me cautious.

Haywood Kelly, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.