Coming Around Again
Last August we moved client portfolios to an underweight position in stocks. This was done due to the break down in the indicators we use that trigger our buy-sell decisions. We maintained this cautious stance until April of this year when we started to see a positive reversal in those same indicators. Currently, we are back to an overweight position in stocks.
There certainly are many reasons to feel anxious about this positioning… the very messy Presidential campaign, weak global growth and a general pessimism about the economy and the markets. What all these concerns leads to is fear, and thus Wall Street’s analysts “bullishness” is at a 15 month low. Merrill Lynch tracks this indicator monthly, they call it their “Sell Side Indicator”. This has proven to be one of their most reliable predictor of future stock returns, which can be found HERE. Here’s the kicker, it is a Contrarian indicator: when Wall Street is most bearish – like it is now – stocks are most likely to have positive returns.
As many of you know we follow Rich Bernstein’s work very closely and have attached his most recent commentary HERE. In short, he believes we have seen the trough in year over year earnings and the next leg up in the market will be an earnings driven rally. In fact, his work suggests we may well see 20%+ earnings growth by year end or early 2017. Time will tell, but we do feel comforted when someone with his track record is aligned with what the moving averages are suggesting.
Planning
We want to remind you that we have many planning tools to benefit clients. Whether you are needing a relatively quick check to see if you are on track for your retirement goals or you want to have a full blown financial plan done, just let us know. These services are complementary to our clients and we invite you to take advantage of them. Our experience indicates that clients who have taken the time to go through the planning process are more likely to hit their goals.
We hope you and your family have an enjoyable summer. As always, we thank you for your support and stand ready to help you any way we can.
Brett, Steve, Becky & Aaron
