Bull or Bear?
The Market
There is a divergence in the force. I took a hard look at the markets and individual stocks over the Easter weekend to see if I could find something I am missing. A reason to go long, get in big or at least get ready for the money machine to print. Unfortunately, I found nothing to indicate the balance has tipped in the bulls' favor.
The indexes are going up but the majority of stocks in those indexes are down or flat. This is the exact opposite signal one would expect to see when a market changes from bear to bull. It implies investors are willing to hide out in Apple, Google, Amazon, Meta, etc. but ignore anything they see as riskier. This divergence has a way of evening itself out over time. In my view, that means the big-cap tech stocks are about to come down or flatten out and pull the indexes with them.
The rally in bonds also appears to be waning and will need more time to make a push higher. The Case Shiller S&P 500 PE ratio is at 29 vs a median of 15.91. The S&P 500 earnings estimates are going lower and the financial problem with banks is totally unknown and very likely not over. Whenever a few cracks are found, such as the sudden collapse of SVB, a few more and bigger ones, are usually headed our way. Built-up systemic risks take time to fully appear and even longer to resolve. We have had 13 years of easy money. That is plenty of time for systemic risks to have found their way into multiple industries.
Our Holdings
I have transferred most of our cash into treasury bills while we wait for better conditions. We do own ORCL, META, WBD, LEN, two Gold miners and a few other tiny positions. No position is higher than 3.5%, which is very small considering a large part of our strategy is concentrated 15-20% positions when the conditions are right.
Looking Forward
If I had to guess what this market is going to do, I think it will show a sideways range bound price for the rest of 2023, which could yield a headline on January 1, the markets closed 10-15-20% higher for the year. In the next one to two years, the market needs a more significant correction as the mindset shifts to higher interest rates, slower growth, and tighter money. We can include higher taxes in that equation as our government gets closer to a crisis with its debt problems.
That said, I am forever a bull on America and the market. I am always looking for my pitch to get in and get in big. I have a close eye on Gold, Oil and a few tech names, but they and most everything else have already fooled me in the past 12 months. Gold has my most bullish sentiment in the near term, but it has rallied to old highs in the last 3 years only to drop and return to its trading range. It sits at its high again today. Is the third time the charm to start a real rally? We shall find out soon enough.