At the core of my market concerns is the diminished outlook for economic and profit growth in 2019-2020 -- and there was nothing in the recent high-frequency data or earnings reports that changes this outlook.
Indeed, for every Facebook ( FB) there is an Amazon ( AMZN) or a DowDuPont ( DWDP) with regard to fourth-quarter earnings.
With political turmoil continuing and our thesis regarding private- and public-sector debt loads unchanged, the market -- much like in previous periods such as January and September 2018 -- has detached itself from the real economy.
One must look to the economic message of the bond market, and with a 10-year yield down to 2.63% on Friday morning, that message is loud and clear.
We have learned that this widening gap between reality and fantasy can continue for a while, particularly with the Fed at the market's side, as the market over the short term is a voting machine
But in the long run, the markets are a weighing machine.
Strategy and Observations at the Beginning of February
2. (Smart men and women may disagree) but consider that the above influences has inhibited price discovery -- so don't believe the charts as much as you might have in the past.
3. Use the market's gyrations and absence of price discovery to trade and invest for the short and long term.
4. Calculate "value" and when the spread between price and value widens, capitalize on the discrepancy.
5. Trade unemotionally. (Remember how hard it was to buy in late December and consider how hard it is to sell or short today).
6. Never ever drop your pre-established risk profile and appetite regardless of market condition.
7. Invest with a calculator and a contrarian streak.