12:00 TUESDAY – Investing Insights #253 – 01/14/25
by Robert Holman, CFA CFP | www.DefensiveAdvisor.com
STOCK MARKET RATING (THE BIG PICTURE) … 6.0 (1 - 4 is bearish, 5 is neutral, 6 - 9 is bullish). Looking ahead, I’ve lowered my assessment from a seven to a six – the election enthusiasm is behind us and worries about policy initiatives are front and center. I hear some talk about a possible “easing” market leading to a 10% correction. The market is down a little more than 5% from it’s peak, and there is some talk about a possible dip of another 5%.
In a “fully valued” market where business conditions are “good” and growth is “slow” (when compared to recovery periods where growth is “fast”) looking at out-of-favor groups that are about to benefit from an “economic change” of some sort is the typical route to achieving excess returns. In addition, searching out companies with improved “management” can accomplish the same objective.
Most stock chart patterns can best be described as flattening out or rolling over due --- to the overall selloff. If earnings are increasing, and prices are receding, that creates opportunity. Not an extraordinary opportunity, but a better-than-average opportunity. Hence, with negative sentiment from some investors, there is reason to wait and watch for a further margin of safety to initiate new positions.
The basis for this view centers around a) the concern that inflation is picking up; b) the resulting increases in interest rates, c) the prevailing view that new policies will cause the market to be better in the second half of the year than in the first half, and d) the continuance of mild selling pressure due to lofty valuations and diminishing clear-cut opportunities, which generally leads to an overall 10% retracement of prices.
While I acknowledge the higher risks and stand ready to reverse course should conditions deteriorate unexpectedly, I’m staying slightly bullish and staying away from making new commitments. In keeping what I have, earning interest on our excess cash and dividends on our stock holdings we are increasing wealth until conditions improve. I’ve got a few stocks I’m interested in buying when conditions warrant.
There are significant expectations of economic changes that bring growth and profits that should occur as we travel through 2025 and both legislative and political changes bring about more prosperity. When the market decides it’s time to resume it’s bullish run, we will be ready and rewarded.
ARTICLE THAT MAY BE OF INTEREST
PORTFOLIOS … After reading this report, if you are unsure how to respond to these conditions, you may send a message to my Secure Email and I’ll reply with the information you need. I’ll also give you a free portfolio assessment, see the link below.
TO MY CLIENTS … THANK YOU FOR YOUR TRUST.
LEARN FROM THE BIBLE ... Proverbs 15:22 MSG - Refuse good advice and watch your plans fail; take good counsel and watch them succeed.
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Opinions in this post are for general information only and are not intended to provide specific advice to, or recommendations for, any individual without our complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss. Nor does past performance guarantee future results.
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