the market bubble we are currently in is showing some signs of a pending material correction of greater than 20%.
What is this market bubble? Which signs are you referring to? How do you arrive at a correction 'greater than 20%'? Granted, the markets have gone up - but we've also had 7 consecutive months of good economic news.
I am thinking of taking profits and increasing cash.
If you have a short time line and will need money from your investment, this isn't a bad move. If you have a decade+ in front of you and will not need this cash, I'm not so sure it will work out very well. That's timing the market, plain and simple.
I worry that after the midterm elections the fed will tighten...
First, you are worrying about things you can't control. If the fed tightens [the supply of money] it will be done in an effort to keep the economy chugging along. Yallen has been far more willing to telegraph what the fed plans on doing, which means the markets have weeks and months to digest instead of jumping around after every fed meeting.
...along with increasing Middle Eastern conflicts / tensions.
Increasing? Sure, the last 48 hours have seen more military action than hte previous 48 hours, but look through the last 50 or 500 years and there doesn't appear to me to be any more conflict or tension in that region than average. Plus, I am curious why you are letting bad news abroad influence your decisions. Are you heavily invested in Israel or Iraq?
Also, while national employment numbers have improved, the quality of the jobs is poor at best ...
I question whether you are confusing the quality of jobs of the newly re-employed and the quality of jobs overall in the US. If this is the case, any job is better than no job for someone who has been unemployed. It's also the best way for them to eventually advance to a better job. If you are arguing that the quality of jobs overall is deteriorating, I'd like to see your source.
... and inflation is driving gas and food cost higher as you all know.
In terms of gasoline, I just don't see this. In the past 3 months gasoline prices have been remarkably stable, and if anything we are in a downward trend. If you compare summer 2014 to the summers of 2013, 2012 and 2011 they appear remarkably similar.
http://www.gasbuddy.com/gb_retail_price_chart.aspxAs for food prices, the food price index has increased 2.5% year-over-year, which is in line with typical inflation.
http://www.ers.usda.gov/data-products/food-price-outlook.aspx#.U71PS6i0bA4What are your thoughts, worries and recommendations?
Look - I'm not saying the market isn't overvalued right now - it very well may be. But broadly speaking there are three ways the market can correct for this. 1) the market crashes, and very soon. 2) the market goes sideways for many months, and then resumes its upward climb. 3) the market contines to go up for many months, and then it crashes.
Problem is, if it's #2 or #3 and you pull your money out now, you loose.
Of course, there's also the possibility that the market isn't that overvalued at all. So much of the talk is based on the market's preformance relative to 2008. BUt if you go back 10 and 15 years, returns have been below the mean. We have corporations with better balance sheets, more cash than ever before, an unemployment that has been trending steadily down, recovery in (most) housing markets, a healthy amount of new starts for homes... in short all the things I like to see in an economy.