Hi GFP. Since I, like many others, have had a good year this month I'm wondering the same thing. Was June the bottom with a V recovery or will we experience a serious pullback over the next few months.
Let's start with the overarching question: Is this a secular or cyclical bear market? There is still some disagreement on this point but while there are still several unresolved issues I see a very strong economy over the rest of this decade as AI, robotics, advanced medicine, CO2 mitigation and Internet 3.0 begin to seriously drive economic growth.
Fairly obviously from my posts, I think this was a cyclical bear and the market is looking forward past the war in Ukraine, supply chain issues, inflation, over supply of retail stuff, re-shoring, a possible Chinese real estate disaster and a few things I'm not thinking about today. When the market looks this strong in the face of this many issues, I listen.
It's not like utilities and staples are leading this run-up. It's growth areas; tech, (led by renewables, semis and software), discretionary, (led by auto-everything and travel) and industrial. Communications is still lagging so some companies like GOOGL are still reasonable.
What are bonds telling us? The 10-year note is still under 3% and 30 year mortgages are about 5%. Unless we think bond investors are idiots which we know they're not, inflation is not the problem we should be looking at.
Since I think this was a cyclical bear and I'm a long term investor, 95%+ of my holdings are one year or longer, I'll continue to buy if the market takes a nosedive over the next few months. As you noted, I think we're a bit overbought here so it's likely, given that issue and seasonality that we'll at least see a pullback over the next few weeks. Unless there's some external event I don't see the SPX going back below 3,900.
As you may know I lost my Ouija board and Ms. Market is no longer talking to me so these are just my ideas. We'll see how it works out.
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