Most of my short-term market indicators have gone green (positive) on US stocks. The medium-term indicators are still underwater since they have to overcome the sharp sell-off in August to regain their momentum. Long-term indicators have been bullish since 2011.
As long as the long-term indicators stay green, such market-timing as I ever attempt is limited to trying to find the strongest industries and right-sized companies within strong markets.
I’ve been calling clients this week to commit cash reserves. Conversations after a correction always bring out their political concerns. That’s when I explain that markets and politics almost never correlate. A country’s economic system (capitalist, socialist, communist, kleptocracy) matters – but guessing what politicians will do is a hard way to make money.
Barry Ritholtz (money manager, Bloomberg columnist and interesting man) has a funny story that says it well. He said when George W. Bush brought his tax-cuts forward in 2001 and 2003, his liberal friends said it would blow-up the deficit and sold their stocks. Stocks went up almost 100%.
When Barack Obama was elected, his conservative friends were sure this Kenyan socialist would destroy the economy and sold their stocks. Stocks went up almost 200%.
Long-story short – a stock only goes up for one reason: more people want to buy it than sell it. Good, bad or unfathomable, those people are entitled to their opinions. We’re more concerned about what they do than why they do it. sh
The opinions expressed here are those of Skip Helms and do not necessarily reflect those of LPL Financial or anyone else. Investing involves risks, including the loss of principal. Past performance does not guarantee future results. Please consider potential transactions carefully and read all appropriate materials before investing or sending money. Securities offered through LPL Financial, Member FINRA/SIPC
International investing involves special risks such as currency fluctuations and political instability and may not be suitable for all investors.
All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.
