We have stated several times recently that we believe the U.S. stock market is probably in a trading range. So far that has been the case. There are currently a number of forces, both positive and negative, that conspire to keep the averages within bounds. These are:
Economy is strong. Valuations are high.
Earnings are growing. Trade war is a risk
Regulations are being reduced. Interest rates are rising.
Taxes have been reduced. Inflation is picking up.
World growth is synchronized. Geopolitical risks remain.
Another contributing factor is that much of the market has been indexed. Too many investors have accepted the notion that being in a broad selection of securities is their best strategy rather than being selective. That notion will be tested by a long period when averages may not do much.
The stock market during most of the 1970’s was also range bound. However, great returns were made in select industries and securities.
We believe we are looking at a similar period. Selection will be very important just as too many investors have given up on that methodology. We work hard to identify opportunities and relish the opportunity to shine.
Stay steady, my friends.
the Lonely Bull