To the Moon Alice!
To the Moon Alice!
This market sure is something. I can just hear Jackie Gleason now, standing in the background pontificating his prediction for the market; “To the moon Alice!”
Of course nothing goes straight up. Not even trees grow to the sky. However, it seems that no matter what you throw at this market, it holds up well to bad news and jumps on good news…just like its supposed to. That’s a sign of a healthy market.
There is a lot of worry that this is just an aberration or a bubble. I agree that the dramatic rise in stocks is alarming. Not to mention that we are way overdue for a correction. However, there is no time limit for excesses in either direction.
This brings to mind one of my favorite market Metaphors: “The market can stay irrational for longer than you can stay solvent.” Yes it applies in both directions.
However, the fundamentals still look good. Remarkably good in fact.
- Earnings have been stellar. That is the best indicator as stocks follow the direction of earnings.
- The Fed continues to be extremely accommodative, continuing to add liquidity to the economy and keeping interest rates down. That is what is driving the economy. Very simply, “Don’t fight the tape”.
- The yet unspoken variable very well could be the demographic cycle and market starting to anticipate the Millennials entering their peak spending cycle. They are supposed to hit their peak spending in 2023 and last for about 10 years.
No matter how you slice it, the outlook is positive, but caution is still warranted.
We are due for a correction and the period between the current earnings season and the next (beginning now) could be an ideal time for that anticipated correction.
We are either in for a nasty, scary, pull your heart out 10%+ correction, to lessen the pervasive optimism or we will get a much more shallow pullback that starts to get scary but rallies back before all the people waiting on the sidelines can get invested.
I believe it will be the latter, but we stand ready for the former.
If you have any comments or questions, feel free to contact me.