What a great start to the New Year! Using the Dow Theory, the transports have had a very strong action. When the transports do well, the market does well. The bull market began in March 9th, 2009, and so far we’re 120% ahead in the S&P 500 index. Is the bull market is running out of steam? Bull markets don’t end until monetary conditions turn negative. In other words, “you don’t fight the fed.”
The great John Templeton had two sayings that I follow: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria” and “the four most dangerous words in investing are….This time it is different.” It doesn’t really matter when the bull started. The current valuation of the markets we still have a long way to go before overvaluation begins. The key is being in the right sectors and riding out the volatility of the political climate. We will be inundated with various doomsday debit ceiling prognostications just like we were in December, but what really happened? The market just had one of its best weeks since before the financial crisis of 2008.
The largest obstacle is the fear that is holding the individual investor back from equities. The reality is that the economy is improving with or without our wonderful politicians. Until interest rates return to reasonable level, where can one find returns that will stay up with an impending inflation reboot?