Download - Market Climate and Weather Forecast
Market Climateand Weather Forecast
Presented by Herb Geissler, Managing Director of The St.Clair Group
Rational Investing/VectorVest Special Interest Group of Pittsburgh AAIINovember, 2012
"It is not the strongest of the species that survives, nor the most intelligent,
but the ones most adaptable to change." Charles Darwin
Secular Bear Market RequiresDifferent Strategies Than During
Bull
Avoiding losses is more important than going after
big gains
Kuznets’ Infrastructure cycle averages 17.6 years for each bull or bear phase
PE Likely To Halve Before Bear Ends
88
Spending Problem is Severe
Congress Must Bite the BulletSequestration on March
1 would trim 10% from 36%
Ominous Triple Top Implies Halving of Market
Value
1500
Hirsch Foresees Six More Years of Pain
Little Book of Market Cycles: Jeff Hirsch
Dow plunges from 14,000 to
8,000
Bear Market Post-Election Years Are Barely Profitable
15 % drop
Current Bull Rally is In-line With Past Pattern
March peak
6 % dropTo April
Low
10% FallCorectio
n
15% FallCorrection in 2014
February 2013February 2013 Long-Term Long-Term
Strategic ConclusionsStrategic Conclusions
1. At mid-point of Kuznets’ cycle, upside is limited; cautious selections and disciplined timing (in and out) are essential. Even bonds are risky now.
2. Deleveraging heavy borrowings, after spending beyond our means, increases unemployment and will cause recessions during next several years.
3. But benchwarmers can’t score points. Look for emerging trends early (eg: fracked natgas) and clearly (Ag commodities vs Industrial minerals)
4. Disciplined timing to lock-in gains is a survival skill in this roller coaster market.
Market Tracks GDP
WLI Tracks GDP andEvidences Past Year of
Recovery
Positive and rising PMI’s support rising marketMarket rises when ISM is above 50, except right after 9/11/2001
Consumer Spending is supporting retail,
wholesale, healthcare and services sectors
Stalling CAPEX Raises Doubts
recent “up-tick” was driven by tax-credits expiring
Financials Often Are Harbingers of Market
Recoveries
Fed Stimulus Liquidity Has Been Real Driver of Bull Market
February 2013February 2013 Intermediate-Term Intermediate-Term
Strategic ConclusionsStrategic ConclusionsLiquidity from Fed still flowing strongly, keeping interest rates lowU.S manufacturing sector becoming healthier,Unemployment is stabilizing temporarily,Europe is resolving its sovereign debt concerns,Emerging Markets are regaining strength. All support bullish US stock market for next few months.
But political uncertainties necessitate investing methods with great selectivity (eg: watch sector rotation) and also using caution in strategies and vehicles.
Remember: we are still in the Kuznets Bear Phase
Weather Forecastfor More Active Investors
When the facts change, I change my position.What do you do, sir?
- John Maynard Keynes
12-Month Moving Average Helps Avoid Major
Collapses
7% above Bear-Zone
IVY Invests Very Defensively
IVY Invests Very Defensively
MTI15 Signaled Exit Before Election,
Confirmed Bull’s Return at Thanksgiving,
But Now is Dangerously Close to 1.6
Topping Flagged Last Week by % of S&P Stocks Above
MA50
Bull’s End Is Confirmed When Summation Index Crosses its
MA20
Traders Still Showing No Fear,
Suggesting a Mild Correction
50/50/0 Rules Shows Rollover,
But Not Yet Confirming Exit
Investors Fleeing Bonds, Fueling Liquidity into Stocks
And Gold Has Not YetRegained Its Luster
High Quality Dividend Stocks Are Favored During Weak Bull
PeriodsRevealing Weakness of Today’s Bullish Levels
Contra ETFs Remain a Risky and Bad Bet
February 2013February 2013 Short-Term Short-Term
Strategic ConclusionsStrategic Conclusions1. Hot market is now chilling out
Topping out and roll-over patterns reveal current risks Tight stops and caution is prudent for stockpiling ammunition
2. Liquidity from QE and bond sell-off provides cushion
Pending correction likely to be a mild 5-10%, making it a buying opportunity rather than a sell-off trigger signal
Simple spreadsheets can signal when to sell and re-buy
3. Preferred Havens are Cash and/or strong and “safe” dividend equities
REITs, Production MLPs, Utilities, Food Makers considered to be attractive havens
Watch for Financials (XLF) to sustain break-out before leaving bunker
Remember: we are still in the Kuznets Bear Phase
Any QuestionsBefore re-grouping into discussion
clusters?