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Permabulls Everywhere? – Seek Other Opinions August 5, 2017

Posted by Anthony in Uncategorized.
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We’re nearly a decade into a bull run. Yellen has continued to repeat her feelings that we should be bullish stocks for a long time. Granted, she’s remained dovish through her tenure as Fed Chair, so it shouldn’t come as a big surprise. However, outside of Dow 22,000, all-time stock highs, P/E’s rising and FANG + TSLA dominating media stories, bond market continues to push south and it seems forever that we’ve seen a healthy pullback, or a pullback of any sort since the start of 2016 (unless you count election morning’s blip).

Low yields seem de-coupled from historical trends – it’s becoming harder to achieve yield there, which would push into higher risk (equities) for larger investors. One point I heard today that was interesting is that companies have already gotten large boosts from the business environment we’ve entered – deregulation and regulatory roll-backs. Estimates put dollars spent on compliance were ever-increasing until the new administration. So, despite fights in health care, insurances, and tax reforms rage on, regulatory environment changing will have major impacts for companies. If we include the bond yields and rate environment, should be a boon for small-caps as investors seek higher returns.

Another thing to watch will be the eventual crash of Venezuela. With its oil exportation, how does that change the landscape, which has stayed range-bound mostly between $42-54. If this squeezes prices higher, that could allow the consolidated space to break out – we’ve seen a band off lows of ~15%+ in the last month alone over OPEC’s decisions. Does this allow some of the beaten-down survivors to further rise – or is there still a wait?

Personally, I increased cash positions in each of my portfolios in lieu of an eventual downturn. Prior – I rode the second half of 2016 and start to 2017 to recuperate that slide at the start of  ’16. From my research, I’ll continue buying emerging markets, weight oil/energy and small caps. Biotechs and the larger cap stocks will be interesting to watch, along with how yields/interest rates turn as we look toward the final 2 quarters of 2017.

DISCLAIMER: These are just my current opinions and do not constitute any advice for any individual. Do your own diligence and form a conclusion thereafter.

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