North Korea is preparing missile launches, Italy doesn’t have a sitting Government, the European Union is taxing Cypriot checking accounts and the US Congress can’t seem to agree on anything. Why shouldn’t the stock market be at all-time highs? The Bull has kept powering through regardless of what’s been thrown in its path. It’s been a remarkable run.
There is a lot to like about US stocks. Money is cheap, because the Fed is keeping rates at historic lows. Corporate balance sheets are in the best shape in decades, if not ever. And the American consumer continues to spend, despite a sluggish economy and a tough job market. We’re also seeing signs that Washington might be able to make some compromises in 2013. That would be huge.
The major issues that plague global markets remain overseas. It’s no wonder that money continues to flow onto our shores, seeking safety and stability. Once more investors are focused on The USA. Foreign investors have been buying up American assets at a feverish pace of late; both US stocks and real estate. Housing has seen a surge in 2013, something that had been missing for most of the recovery from the crisis of 2008. With a supportive Fed, US stocks should hold in well this year.
This last wave of the rally has been pretty explosive, and recent fund flows suggest that after a 4-year absence, the individual investor has finally returned. This is a bit of a contrarian indicator, because generally retail investors are late to the party and are performance chasers. We have gotten a bit defensive in recent weeks. Not that we are concerned about a major correction, although some of the issues around the globe could always boil over. We just feel that this leg of the rally, which began in November, is due for a bit of a breather. And despite the stock price increases, stocks generally aren’t that expensive. Earnings season will provide the facts for us to review and reassess. We have cash ready, and plan to buy weakness.
Friendly reminder: Tax Day is Monday April 15th. Uncle Sam loves his payday!
Have a great weekend.
By: Mike Frazier
