Just A Little Patience…
Technology will be everything in the future.
It will become so much a part of our lives that it will disappear.
And with it we will need to become much more cognizant of disruption. Because along with that disruption there will be more times when uneasiness can and will seep into our minds during a sea-change in massive opportunities for the future.
Overcoming the aspect of falling into these emotional or temporarily worrisome traps will be the hallmark of the future long-term investment landscape winners.
Patience and discipline will be the pillars for investment success.
Just the way they always have been.
Just remember, if this was easy everyone would be doing it right, and there would be little gain to be made from it.
On That Front...
Cash in bank accounts continues to expand to gigantic levels, bonds continue to be the asset of choice, and last but surely not least, sentiment remains miserably low given we are fluttering around all-time highs:
So, there you have it.
Two-thirds of investors do not feel good about the market's future.
Now, it may very well become a little tougher to make much more headway this year as the holiday haze begins this weekend.
I suspect it would be helpful to go on pause and let the energy build for next year's new problems.
But all the while improvement keeps rolling in:
- LEI's are solid even as the negatives seem overwhelming.
- Inventories are getting leaned out and technology is scorching every layer of business.
- Housing stats just released show a 3.9-month supply - a near record low - and a record set of buyers headed our way!
It’s almost stunning that this is all being lost in the day-to-day fear mongering.
There’s growth in earnings too.
We have stated all year that earnings "growth" would be clouded by the year-on-year comparisons against last year's tax bump.
That’s burning off and now, yet for the last three weekly readings we can see forward earnings are growing again.
And they’re growing while the trade war, impeachment hearings, divisiveness, unrest, global turmoil, China problems, and border problems own the headlines.
The change at the base doesn't look like much yet.
But be patient.
This is a stat that really measures the "rate of change" of the forward estimate.
It’s not tracked on a widespread basis. But don’t overlook what that breakout to new highs (after a 21-month trade range) also tracked to when this number turned upward again.
A continuation higher bodes positively for the S&P 500.
Viewed from a larger perspective, it’s important to recognize this breakout took place WHILE all the current headline fears - overloading too many mindsets - were flooding the airwaves.
As usual, fears are blocking the recognition that once again the US economy continues to succeed in climbing the mountain.
The rainy-day fund consumers have accumulated over the last decade is trillions of dollars deep.
And it’s quickly showing that gut feelings are rarely a reliable method of market timing or investing.
The latest sentiment readings suggest that pile of cash should only trickle higher.
That's good by the way!
And so is the fact that the market is about 2% or so into new highs.
But it has "struggled" this week according to the experts on air.
That struggle is actually a positive. Tentative price action at all-time highs - or even slightly corrective actions to test breakout prices - are excellent signs that money is not flooding into markets.
Participants are not overly bullish. There is no zealous drive to grab stocks at any cost.
In time, while it has not been covered much at all, we would argue that the last 21 months have not just been a trade range for the markets - but a stealth bear market as well.
Technically speaking the measure was met on Christmas Eve morning in Q4 last year, when the Dow Jones fell 1,200 points while everyone was shopping.
The 20% dip from highs mark was met on several indices - at lows of the day - for just a day.
Hence, it was lost on most.
Had it stayed there for months everyone would have covered it incessantly with the bear market tag. But it was erased the next day after Christmas, with an 1,100-point rally.
Historical significance? You bet.
In the past, when a market fell 20% from its highs and then went on to hit all-time highs, it was defined as a new secular bull market.
Do not be surprised at all - even if it takes a few years to enter mainstream mention - when we hear that the "new bull market" is still young.
In facts, it’s just three weeks old. A relative newborn in the grand scheme of things.
Now, to keep the theme even-keeled, please do not assume that means nothing but roses and blue skies ahead.
It never means that...
Be ready - as the Trade War frenzy dies down - and the impeachment divide thunders forward – for more monsters to come.
As I’ve said many times before, they will be worse, they will be bigger, and we will be told they are more damaging than anything we have ever encountered.
But, like always this all takes patience and a deep breath to relax at times.
And all the while, the headlines will be there to scare you into missing those facts.
As the new decade begins to peer over the horizon - it will once again become clear that our economy can and will survive the trade war.
And in the process, as companies find or build solutions to move forward - a vast portion of the investor audience will slowly recognize two things:
- Fear has cost them dearly again, and
- They are vastly under-exposed to equities.