When discussing the likely post GFC market back in 2010, my feeling was that we wouldn't see the V-shaped recovery that typified previous corrections. I originally called a square root recovery more likely i.e. a drop followed by a rise and then a sideways market for some time. My feeling was based on a belief that the markets, while relieved the world didnt implode as was feared, believed the mechanism used by governments to stimulate economies would lead to problems of its own. Specifically, a fear that debt being used to resolve a debt crisis was paradoxical. I think that's where we sit now.
QE has to end at some stage - that's one of few market certainties. Simply, the US govt balance sheet probably cant afford it much longer (if they ever could). An end of QE brings higher US bond yields and a fair chunk of volatility in currency markets. Equities are priced against bonds which are regarded as risk free assets. When bond returns (yields) go up, the attractiveness of equities declines as equity holders demand a greater return on their higher risk investments. It's all macro-economic blah blah but the implications of a repeal of QE is real.
Unfortunately our long suffering ASX 200 just cant seem to get it's sorry ass out of its current trading range. Investors appear to be making money on the way to circa 5500 - 5600, panicking and they selling down to 5400. We have been stuck in this range between 5100 and 5600 for a year now. In the past fortnight the index has dropped by more than 200 points and it's barely rated a mention - largely I think because it's happened so often in recent times.
My advice would be to ignore your broker's call to buy and hold. This is a traders market and if you want to outperform, you have to ride these shifts in sentiment until we see a clean break to the upside. Buy good companies and trade their ranges knowing that they're better buying when the price goes down. Either that or just keep collecting your dividend cheque and ignoring capital values (ie the SMSF crowd). There is no harm in buying good companies within a trading range as they're always good companies regardless of what the market does. Making money consistently on the same company as they fluctuate with market volatility is something we've done well over the past few years. It's a hell of a lot more enjoyable than coordinating our hat collection in a sideways market.
With the removal of QE likely, AUD depreciation likely, war in the Middle East a certainty (again) and the Scottish independence vote in a few days, things are certainly heating up.
