I turned long term bearish in July. I think most of the current rally is behind us and agree it is a good time to reduce exposure if one feels heavily exposed. There still may be a better buying opportunity before the end of the year. The market internals are very weak here.
I promote a seasonal strategy but I also know that we need to sit on the sidelines for a few of the favorable seasons. The largest stock drawdowns have occurred in the unfavorable season after the down favorable seasons. I call these seasonal reversals, because the only time the favorable season has been down since 1995 was at the start of the last two bear markets. The simple Sell-in-May strategy lost 12% after buying in November of 2000 and 10% in 2007 for the SP500 (TSP C fund) over the next six months. The follow-on unfavorable seasons were devastating. I am firmly in the camp that believes valuations will reset to better future long term returns in the next few years – after a bear market in the stock market similar to the last two.
Jack Bogle who invented the index fund and was the founder of Vanguard is a very smart man. He recently stated he expects stock returns to be as low as 4% before inflation over the next 10 years. I think that is the best case scenario based on the earnings cycle.
Bogle is making the mistake of using today's earnings to calculate Price-to-Earnings ratios and valuations. If you use methods that eliminate the cycle in earnings and provide a more solid historical yardstick for determining future long term returns, you will find the 10 -12 year future return of the SP500 (TSP C fund) is closer to zero at their price current levels.
The reason we have large bull and bear markets in the first place is because there is an earnings cycle that investors chase and then momentum carries the indexes to higher levels well after earnings top out as they have today. The recent earnings cycles have been extremely large in part due to the extreme monetary policies of the central bankers. Again I expect much better valuations when the current cycle is complete.
Money is flowing to a few large cap growth companies which is why the C fund is outperforming the S fund. I think this is partly a defensive move since these companies can weather any storms. These companies are also taking market share away from other companies in their sectors. The Tech sector would have negative earnings if you eliminated Apple's earnings.
The market is becoming very narrow and concentrated. Yesterday when the current rally took the SP500 (TSP C Fund) within 2 ½ percent of its all-time high only 45% of the SP500 companies were trading above their 200-day moving averages. This defines poor market breadth and is not a healthy sign.
Market internals have been weak and diverging to the downside since July. The August correction cleared some of the divergence, but the divergence has grown again. Unless the rest of the market can find a bottom and follow the leaders, the markets are skating on thin ice once again.
I posted some TSP charts and more comments at http://report.tspsmart.com/2015/10/23/tsp-charts-balancing-act/
Michael from TSPsmart.com
__._,_.___
Posted by: Michael Bond <michaelhbond@yahoo.com>
| Reply via web post | • | Reply to sender | • | Reply to group | • | Start a New Topic | • | Messages in this topic (9) |
Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.
.
__,_._,___
Anda baru saja membaca artikel yang berkategori dengan judul [TSP_Strategy] Re: Best Six Months Begins Now. Anda bisa bookmark halaman ini dengan URL https://1stleadershipworkshop.blogspot.com/2015/10/tspstrategy-re-best-six-months-begins_27.html. Terima kasih!
Ditulis oleh:
Andriansyah -
Belum ada komentar untuk "[TSP_Strategy] Re: Best Six Months Begins Now"
Post a Comment