The equity market looks to open on a weaker note:

  • China’s Coronavirus virus has begun to spread and four more people have died as the WHO warns it is being passed person-to-person.  China labeled it a Class B virus, the same as SARS and causing fear of rapid spreading.
  • The World Economic Forum is meeting in Davos, so we will be hearing from nearly every CEO and monetary authority over coming days.  They will all be answering the question about forward growth and monetary stimulus.
  • The Senate impeachment trial begins today and while coverage will be vast, we do not see it as a market moving event.

We are reducing our market and offensive sector views from positive to neutral given the extreme overbought condition and high level of optimism toward equities, especially in the Information Technology sector. We have been recommending an aggressive field position since emerging from the third mini-recession and market plunge late in 2018, and now believe it is time to take offense temporarily off the field. The S&P 500 (SPX) is up 33% since the end of 2018, led by the Info Tech (56%), Communication Services (37%), Industrials (31%) and Financials (30%) sectors. Our view since mid-November has been to hold current equity exposure and stay overweight in Info Tech, Financials, and Industrials given our core fundamental thesis and the upside momentum, we have not wanted to add new exposure until the intermediate overbought condition and investor optimism have been reduced. The market and Info Tech sector have reached a point that warrants a change in view – even if it is temporary.

We will have the full post up in the Gold subscriber section in just a little while.


Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. 

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