More than just sector rotations, the U.S. stock market has been toggling between defense and growth. One day investors buy up companies with defensive characteristics then within days these are sold in favor of more aggressive business cycle sensitive stocks. Investors are responding to near-term news events that might point to a slowing economy then later to something that indicates all is well. This incessant change of direction can be unnerving to many.
Sector funds, especially those in the form of ETFs, make it convenient to make short-term bets on sector performance. Unfortunately, convenience does not make for good investment strategy or results. Trying to stay ahead of investment sentiment is near impossible and usually a fool’s game, especially during uncertain periods with sudden changes.
Successful investing requires a coherent, informed outlook and strategy. Ones based upon longer, more reasonable time frames offer much better odds. The Bull’s outlook is for three to five year time frames. These longer periods smooth out day-to-day jitters and allow for business strategies to show success.
Remember, stocks are not just pieces of paper, they represent ownership in companies. It’s company performance that ultimately determines a stock’s value.
Companies are still doing remarkably well; the profit outlook is excellent. Our economy continues to expand, the world is not falling apart; it rarely does. Much day to day news is noise and upon close examination has less significance than expected; stay steady, my friends.
The Lonely Bull