Sep 15, 2014 Current Conditions
Not since the precarious days of 2007 has the market gone so long without corrections of 5%, 10%, and 20%. Is the streak about to end? Geopolitical speculation is running rampant (think Middle East, Ukraine, Scotland, etc.) and September-October has a bad reputation. A dozen of the Dow Jones Industrial Average’s 20 biggest one-day drops have occurred from mid-September through October, most recently in 2008. It’s understandable that investors would be worried and nervous.
Despite high valuations and a recent market pullback, our indicators have yet to warn that equities are heading for a gut-wrenching descent. In fact, with the uptrend intact, the anxiety is a positive sign. As the adage goes, equities “climb a wall of worry”. Global breadth remains strong, led by the U.S. among regions and Technology among global sectors. We expect the low interest rate environment to persist, the global economy to keep expanding, and earnings growth to come through, all to the benefit of the global market uptrend.
The chart below shows positive indicators in both the trend in stock prices, “The Tape”, as well as economic indicators, “The Fed”.
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