Founder & Chairman
I’m not sure what’s more improbable. The seemingly endless move upward in the stock market, or the fact that football season is officially halfway over, and the Lions are still in first place! Since I can’t give you any logical or rational explanation as to why the Lions are a legitimate playoff contender, I will attempt to make sense of why the stock market continues to chug along. The Lion’s have Calvin Johnson, and the stock market has…Ben Bernanke.
In spite of their best efforts to screw things up, our politicians managed to do, well what they typically do, and kick the can down the road a little further. But really, did that surprise anyone? Haven’t we seen this movie before? The media did their level best to convince us all that there was a real chance the U.S. could actually default on it’s debt. The politicians were complicit, and strung it out for as long as they could. Many government workers ended up getting a nice paid vacation courtesy of the tax payer, and in the end, virtually nothing got done. In fact, we get to do this all over again in January, as Congress has extended itself the courtesy of fighting with each other through the Holiday Season before they will face the next pointless budget deadline. Our Washington insider, Andy Friedman, has informed us that when all is said and done, a minor adjustment to the way social security inflation is calculated, and the closing of a tax loophole that typically only applies to the very wealthy are the most likely concessions either side will get. What does this all mean for the stock market? I’m getting there.
The economy is just bad enough to keep the Fed involved, but not bad enough scare investors away from stocks. With the most likely “triggering events” behind us with the budget negotiations and debt ceiling fight pushed into the new year, stocks appear to be headed steadily, albeit perhaps slowly, higher. Earnings season was pretty much as expected, decent but not great. Interest rates have remained in a relatively benign trading range. The overall economy is growing -but let’s not kid ourselves, growth is a relative term. I’ve seen aircraft carriers move faster. The bottom line, as long as the Fed continues its current monetary policy, the market is likely to continue its slow and steady move higher. Of course, there will be pockets of volatility, but we just don’t see any major triggering events in the short-term. That’s the problem I suppose, is generally, you don’t see them until they’re right on top of you. Thankfully, we have the algorithm, which has proven to be a very useful tool so far.
We’ve updated the models and there were a couple of minor changes we’ve made to some of the portfolios. The algorithm has indicated that biotech seems to be rolling over, as is health care. We’ve replaced those with solar energy and the NASDAQ. Overall, the algorithm is still indicating that market conditions continue to appear favorable, and that we should maintain our current levels of equity exposure. Interest rates have risen slightly over the past week we are keeping an eye on that situation, and may make further adjustments if necessary. For now, enjoy the ride, and take pleasure in our local professional football team. Let’s hope both the market and the Lions continue to pleasantly surprise us!
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