The Bottom Line
Bias:
Positive for Stocks
Negative for Interest Rate Sensitive Bonds
• Stocks both domestically and internationally are in an uptrend and we are in a bull market.
• When the S&P 500 is hitting all-time highs, international markets are advancing strongly, and market breadth is positive – there is no other way to view the market other than positive!
• I am seeing more evidence of long-term reversals in trend that suggests:
1. Rising stock prices
2. Rising bond yields and thus lower prices for Interest rate sensitive bonds.
3. A falling dollar
4. Rising commodity prices
• The thing to keep in mind is these are long-term trends. Treasury yields have fallen for over 35 years and commodity prices have fallen for about 10 years. If these trends are reversing to the upside, they could have long-term implications.
• October Newsletters addressing the early moves in yields, bonds, and commodities:
Bonds a Ticking Time Bomb I – October 4, 2017
Bonds a Ticking Time Bomb II – October 25, 2017
• Long-term, the weight of the evidence continues to be bullish for stocks. At some point, this will change and when it does, I will have no problem flipping to a bearish bias and reallocating client accounts to a more defensive posture. However, market technicals continue to signal that we are in a bull market and thus we should be invested in stocks aggressively.
Client Update
I continue to view stock market risk as low, thus our accounts have high stock market exposure.
I have continued to add to our equity holdings by buying stock funds that have pulled back and are in long-term up-trends.
We do not hold any interest rate sensitive bond funds.
Market Technicals
The stock market continues to advance strongly in 2018. The S&P 500 is up 5.96% for the year. Below is a weekly chart of the S&P 500. The index is above its 10-day moving average and trending resolutely higher.
We are in one of the strongest bull markets that I have seen in a long time. I continue to feel that stocks are going to rip higher. Of course there will be short-term pullbacks and consolidations; however, overwhelming evidence continues to suggest an environment of global stock market strength!
Here is a concise list of the reasons why I continue to be so bullish:
• Price action is positive. The trend is strongly up.
• Overwhelmingly positive market breadth.
• Most international markets are hitting new highs.
• Risk-on stocks are outperforming risk-off stocks.
• Economic conditions continue to improve.
For those of you that have been a client or read my newsletters for at least the past few years know that I am not perpetually bullish. In the past, I have moved completely out of stocks when market technicals suggested risk was elevated. The last time this happened was in November 2015 – see our newsletter: Recent Market Advance Looking Very Suspect.
When market technicals turn negative, I will change my bias. Until that happens, let’s enjoy the ride.
Email me to schedule your free, no obligation retirement account allocation review.
Craig Thompson, ChFC
Email: [email protected]
Phone: 619-709-0066
Asset Solutions Advisory Services, Inc. is a Fee-Only Registered Investment Advisor specializing in helping the needs of retirees, those nearing retirement, and other investors with similar investment goals.
We are an “active” money manager that looks to generate steady long-term returns, while protecting clients from large losses during major market corrections.
Asset Solutions is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.