Good morning everyone. Having Christmas and New Year’s falling on a Wednesday likely makes for two weeks of investor decompression from an amazing year in the markets that came with so many challenges. It truly is hard to believe just a year ago the market was down 19.6% and suffering the worst 4th quarter since the Great Depression for the major equity market indices like the S&P 500. Today, the opposite seems to be true with our four key tactical indicators remaining overbought and optimistic.
That doesn’t mean the market has to go down big, especially given the reality of:
- an easy Fed,
- widely available credit for businesses and households,
- a solid domestic economy with a tailwind of the millennial demographic
- the positive inflection in global growth from historically weak levels.
Our reasons for being bullish have nothing to do with a trade war, Brexit, impeachment proceedings, REPO market or anything else in the news. It is centered around the idea the folks that print the money (the Fed and global central banks) continue to tell us they have no intention of tightening monetary conditions. Although there are sure to be shakeout periods along the way, the only reason to truly be negative is when monetary conditions are tightening to a degree that suggests an imminent recession. There is just no indication of that currently. Sure, there is excessive optimism and our indicators are overbought – but that only suggests an environment that could bring a temporary setback rather than a prolonged decline. As you know we stand ready and have explained our near-term tactical view in the brief video.
Have a great day and I will chime in if something happens to the tape over coming days. Again, thanks so much for your subscription and interest in DwyerStrategy, and have a very safe and happy Holiday season.
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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