Once again, the U.S. stock markets have bounced off the bottom of the trading ranges established this year. That trading range is 2600 – 2800 on the S&P 500, plus or minus a little and about 24,000 – 26,000 on the Dow. Depending on the news flow, markets should again approach the higher end of the range. This is historically a strong period for stocks, but news events can certainly play havoc with that momentum.

The trading range reflects a balance between positive and negative impulses in today’s business environment.

On the positive side; excellent current conditions, record earnings, a better regulatory regime, and business momentum.
On the negative side; increasing trade friction, higher interest rates, loss of international business momentum, potential political instability, and fears for the future.

We do not expect an upside breakout from this range anytime soon. However, the composition of leadership with the stock market is changing. Returns will come from moving portfolios to the new winners and gathering current income. Patience is also required as investors gradually adjust to a different trading environment. Bargains are also to be had but may take some time to realize full value.

In short, the long game is now the important one, but understanding the current dynamics is important.

Stay steady, my friends.

El Solo Toro