So lets recap real quick....the markets were down by over 10% through the second week of February and now thru the 3rd week of March the markets are right at positive....that is a 20% SWING! By definition we have seen absolute VOLATILITY! Forgive me for all the capitalized words (my father does that ALL THE TIME) but I'm trying to emphasize how dramatic the moves up and down have been.
Well to begin I am not a soothsayer nor do I have a crystal ball and I do not pretend to know where and when stocks will go up or down, but that being said I do look at a ton of factors/opinions/data points/historical points/sentiment readers/etc to try to come up with a general "idea" on what direction stocks (or economies) will go in...I also rely upon the incredible research I come across from several of the smartest investment minds in the business that I've been blessed to have come into contact with over the years. All that being said, I believe the markets are treacherous and the moves up and down are enough to make someone sick when they look at their investments accounts on a continual basis.
I personally believe we have been in the midst of a short term "rally" in stock prices in an otherwise sideways to downwards markets....here are some of the reasons why I do not think the overall backdrop for U.S./Global stocks is very promising at this current time.
- auto loan delinguencies and auto sales are both declining quarter over quarter (economists use auto loans/sales as one of the ways to measure the overall consumers health)
- Growth Domestic Product (GDP) has been topping out over the past 3 months
- Corporate Profits have started to stall and look to start to decline
- U.S. Homebuilder confidence as measured is at a 9 month low (and rates are rising which will continue to put pressure on this sector)
- Retail sales were way below expectation over the past holiday season
Simply put, I think the U.S. economy has slowed, despite the low price of oil, and corporations are seeing their earnings decrease which ultimately will lead to lower U.S. stock prices. Based on conversations I've had with other money managers and looking at historical stock prices based on current earnings, I am of the belief (altho I am not being dogmatic about anything b/c I am often wrong), that stocks are overvalued by 5-7%...sounds like random numbers but they really aren't.
Long story short, I have been looking to take profits in stock/mutual fund investments that I own as the markets have rebounded and rallied over the past month as I think we will see stocks move down over the coming months.....
More to come on this later (and also where I believe we will be able to see growth/positive returns).
