I am sure the title of this post got your attention. I rarely make proclamations, however I am going to take the position that the bull market is just getting started. You will read why below.
Before I share my rationale, allow me to discuss a very famous “Trend Follower” trader. The trend following school of thought, one that I subscribe to, states that maximum returns are obtained from large, long-term trends, and smaller sub-trends within the large trend. It also states that trying to guess the future is a futile endeavor. A gentleman by the name of Ed Seykota, a professional trend follower, having managed money for others, coined what is termed “The Magazine Cover theory” This theory saw its birth in the 70’s, pre-internet, but the concept still applies, only now you should include any big-name news website in addition to print magazines.
In sum, whatever a magazine cover says about the market, just do the opposite. And you typically will see gains in your portfolio. Note that many in the press are promising a crash to the “Trump Rally” and in doing so, they are throwing everything at the wall just to see what sticks. Remember, the Trump Stock Market is all about policy-driven events, not interest rates. Also observe that Mr. Trump claimed we would learn more details regarding his tax reforms within the first 100 days of his administration. With any luck, America’s parents will have some extra cheer in their step just in time for summer vacation, and some breathing room in the family budget to take junior to Wally World.
What has happened in the markets since my last post ? On February 9, the SP 500 broke thru the 2300 level, and in doing so, in my opinion it added new energy to the current uptrend. The first “kickoff” of the uptrend occurred after the elections, then a second “confirmation” occurred on December 7. Another way to look at this action is an “uptrend within an uptrend”. Lets take a look at some charts, the second version of the charts below have my comments on the charts:
As can be seen above, the markets are doing quite well, making new All Time Highs in recent days and displaying positive volume action. On a 30-day look back, the S-Fund and C-Fund are running pretty closely neck-and-neck with each other. Top sectors/industry groups are Financial Stocks, Mining, and metal producers. These are all “old school” large-cap stocks, so some argument exists that a move to C-Fund is warranted. C-Fund indeed may outperform S-Fund in the next 30-60 days. However I remain 100% S-Fund, since small cap stocks in almost all cases outperform their larger cap brothers. I-Fund had some bursts of energy in January but in my opinion, the world is about to jump in with both feet into US stocks. If that occurs, the domestic stock funds (overly complicated term for C/S Funds, or the L-Funds with C/S exposure) will do very well. I hesitate to guess which fund will do best, if you want that, numerous TSP advice sites Ad-nauseam exist, all trying to outguess and outpredict each other (and all with no identifiable real human owner behind their content…). I offer no performance claims, but I will share this old screen shot from a 2014 Corporate Finance class I was taking as part of an MBA program. The screen shot involved a “stock market trading simulation.” Some in the audience will recognize my username. I post this here for entertainment value only….
Instead of a crystal ball, I respond to what is happening, and right now, we have C-Fund and S-Fund both performing very well.
In summary, we have a potential argument in support of why I think the Bull Market just got started. With a little luck, hopefully I am right. Thank you for reading and please continue to share this site with your friends and colleagues.
-Bill Pritchard
