So, the stock market got hit; if not by a hurricane, then at least by a strong squall. Just like Hurricane Michael, this wave of selling spooled up quickly. What set it up? Pundits point to a variety of worries. These are paraded out periodically and are useful to explain all kinds of events.

However, the reality is that there are always concerns. The current preeminent ones include rising interest rates, tariffs, inflation, and their effect on future earnings. These are not new!

The great thing about good businesses is that they can and do adjust to all these factors. The adjustment may take more than a quarter or two, but don’t believe that they can’t adapt. Another factor is valuation and this one may be the real one. For a long time, the stock market has been dominated by a small group of high growth dominant companies. As most of the market languished, these stocks powered to higher and higher valuations. Finally, prices seemed too high for realistic projections and these began to correct.

The stock market has been slowly moving away from growth to value, sensing that one had been over-played, and the other’s time may be coming. Suddenly that process may have accelerated. At any rate, vicious sell-offs are a regular feature of bull markets; this may be just another. We have long predicted a shift back toward value stocks, we will see if this time it follows through. We need a little more time to tell.

Stay steady my friends, we are.

The Lonely Bull