By Peter Switzer
Today is the first of our Investor Strategy days, which have attracted over 1000 wealth builders. Today, we’re in Sydney. Next week, we go to Melbourne on Tuesday and Brisbane on Wednesday. What follows is what I’m going to tell those who come along.
In case you’re not attending, this is what my introduction to the day will say:
- Despite the Trump rally since November 8, the Nobel Prize-winning economist and Yale professor, Robert Shiller, thinks stocks can go higher.
- Goldman Sachs is forecasting a correction but it’s not horn-turning on the bull market.
- Big bond player Kumar Palghat of Kapstream Capital says: "On the medium-to-longer term, I think you should still be bullish risk assets," he said. "There'll be some sort of delivery from the Trump administration — and this is just a hope — whether it comes from corporate taxes or infrastructure or trade." (CNBC)
- Our market did a better March quarter for stocks than the Yanks but Bespoke Investment Group co-founder, Paul Hickey, thinks a special stair-step pattern chart points to stocks climbing the stairway to stock-player’s heaven! (my words not his). Looking at the S&P 500, he sees a larger percentage of stocks making new highs. In early March, 25.8% of stocks in the S&P 500 made new highs, which was the highest single-day reading since December 2013. This points to stocks heading higher, not lower. "The recent sideways trading in the S&P 500 is just a continuation of the stair-step pattern the market has been in for more than a year," Hickey wrote to CNBC. If the pattern continues, the next "step" will take the market higher.
- The correction in commodities with the oil price down 10% in a month might be a first step to an overdue correction. Analysts who hold this view still see the bull market with upside.
- There is a mystery buyer called “50 cent”, who has bet $75 million on a correction using the VIX, and he’s still buying!
- “Sell in May and go away. Come back on St. Legers Day.” Is this old market rule worth following? Between 1998 and 2012, the May-October return from 37 markets was 0.95%, while for November-April, the pay off was 10.69%! This fact can easily take buyers out of the market but the only thing I will say about now is that low interest rates worldwide make this play less attractive in 2017.
- Adam Posen, president of the Peterson Institute for International Economics, thinks the US will go into recession in two years’ time! "The workforce is only growing at 0.5 percent and productivity's at 1 percent so it can't reach these 3-4 percent growth targets. If unemployment is, unfortunately, about as low as it's going to go, you can't pick this up." Given the US economy’s structural issues, Posen thinks the Trump stimulus will create growth but then inflation, higher interest rates and recession.
I’ve always said I like stocks in 2017 but I’ll be more cautious in 2018. I could be convinced that 2019 could become the bogey year for the stock market.
As you can see, there is a diversity of views out there. The likes of Charlie Aitken, George Boubouras and Paul Rickard and many others speaking on the day will open our eyes and minds to how we should be investing in Trumpland.
I’ve always liked the argument that high valuations are never the cause of a sell off — it needs something else.
Donald Trump can be the villain or the hero in this story. At the moment, he’s the latter.
If he becomes the villain, we’ll be the first to let you know and we’ll tell you what you should do as a response.
This is what we do at Switzer. This is what I do here each morning. And I really appreciate the support my readers, viewers, listeners, subscribers, financial planning clients and investors in the Switzer Dividend and Growth fund show us. It makes it all worth it!
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