The last two days have been interesting. Bernanke says inflation is still in check, so we may not cut rates. Then Europe raises rates, and investors are responding negatively. So stocks fail to respond when China drops almost 20 percent in a week, but drop on interest rate fears?
I think that we are in decent shape, but the health of the economy has been overstated. The past week or two, all I could read about is how cheap stocks still are. That may still be true, but you cannot overlook the potential downside issues either. Inflation, credit and lending problems, budget deficits, and lots of cheap money.
In this climate, I think its good to stay defensive, while still looking for potential bargains, especially if we trade lower.