Investors, it’s time to build up cash for potential pullback buys

Robert Decker, Mike Archibald, Craig MacAdam, and Greg Taylor, of Aurion Capital Management Inc pose for a photograph at their downtown Toronto office.

The U.S. economy have made a turn for the better in recent weeks, but there remain plenty of signs that warrant near-term caution for equity investors.

Although housing, autos, wages and other job-related data appear to be improving, important indicators such as market breadth happen to be fairly weak for the S&P 500 and S&P/TSX composite indexes.

Trading volumes are rather tepid and monitored sentiment data indicate high levels of investor complacency. Recent data in the American Association of person Investors reveal that the bulls and bears are about even, but a lot of institutions are sitting in neutral.

“We’ve had a really choppy market in which the indexes have effectively done nothing for around eight months,” said Mike Archibald, a portfolio manager at Aurion Capital Management, pointing towards the uncertainty surrounding the U.S. Federal Reserve’s next moves in addition to relatively weak Canadian and U.S. earnings.

But since stocks look fairly valued for the most part, the Aurion team, including co-managers Greg Taylor, Craig MacAdam and Bob Decker, thinks raising some money makes a large amount of sense at this time.

The managers from the?Dynamic Aurion Tactical Balanced Fund and the Aurion II Equity Fund aren’t with a market correction, but using a bit of dry powder to purchase good businesses is going to be useful if stocks withdraw three to seven percent – something they think about a real possibility.