The "State of the Markets"
As we embark on a fresh new calendar year (aka the scorecard in our business), the question of the day is – in my mind, in my mind, anyway – will the bears will be able to locate their long-lost mojo anytime soon?
To be sure, it has been a while (a very long while, actually) since our furry friends have enjoyed more than a day or two in the sun. So, with the market having effectively been a one-way street since the November 2016 election, it is easy to see why complacency is exceptionally high, passive index investing is all the rage, and every 1% dip in the S&P 500 is considered a buying opportunity.
While nearly everyone in the game knows that when you mix extreme valuations levels with rising rates, bad things tend to happen – eventually. And yet, the bulls have refused to yield the floor for record-setting stretches. Recall that this is now the longest period of time without a 3% correction in decades and that markets cycles experiencing volatility levels this low are exceptionally rare. As such, every trader worth their salt has been waiting (and waiting, and waiting, and waiting!) for the inevitable pullback to begin.
So, will this market once again ignore the seasonal tendencies and correct a bit to start the new year? Or will it be more of the same? Unfortunately, only time will tell, of course! But, I for one am going to be prepared for anything in the first few weeks of the year.
My Big-Picture Bottom Line - I see enough weakness in the indicators and enough complacency to continue to suggest that this is not a low-risk environment.
In terms of investing strategy, this means that your portfolio turbo-chargers should be ...