He writes, "... I believe the odds are excellent that I will not change my allocation again this year, although I will certainly be doing my monthly pulse check to make sure we remain in the Mid Stage of the business cycle."
Any update on how the various advisory services that TSP Strategy used to track frequently are performing?
'Fear of missing out' is driving this stock-market rally
Published: Apr 19, 2016 11:28 a.m. ET
'We have to play this game even if we don't feel very good about the market'
Investors don't want to miss the party.
U.S. stocks are up 14.5% from their Feb 11 low, with the S&P 500 hovering a hair's breadth away from the all-time high set nearly a year ago, all thanks to a pair of acronyms: FOMO and TINA.
FOMO is the "fear of missing out." TINA stands for the notion that "there is no alternative" to equities right now.
There are legitimate reasons to dislike this kind of price action—earnings are terrible, the economy is slowing, and low oil prices may reflect lackluster demand in the world economy.
Yet, FOMO and TINA are fueling investor appetite for stocks, some analysts argue.
According to American Association of Individual Investors, market participants shifted cash into equities last month, raising their stock allocation to 64%, above its long-term average of 60%. Meanwhile, cash allocation fell to 18.5%, below the historical average of 24%.
"We are in an environment where negative economic data, negative earnings growth and even a drop in oil are now shrugged off," said Channing Smith, portfolio manager at Capital Advisors.
"Human emotion, which is the biggest wild card in investing, can surprise you. There is still a lot of momentum trading," Smith said.
Smith explained that years of Federal Reserve intervention, including quantitative easing, have conditioned investors to buy the dips. The worry now is that investors are chasing returns.
The S&P 500 SPX, +0.00% rose 0.7% on Monday, shrugging off news over the weekend that major oil producers failed to reach an agreement to freeze production, while the Dow industrials DJIA, +0.12% topped 18,000. Stocks were on the rise in early trade on Tuesday.
"There is truly no alternative and if fund managers want to keep clients, they have to participate in this market, they simply can't afford not to," said Lance Roberts, chief investment strategist at Clarity Financial.
"You can hate fundamentals all you want, but when price action is bullish, you need to stay invested. Our technical signals indicate adding exposure to stocks and that's what we will do," Roberts said.
Roberts acknowledged that his strategy could be characterized as chasing returns, but said his position is more conservative than average, with 50% allocated to cash.
Smith at Capital Advisors agreed that it is difficult to stand aside as the rally continues.
"We continue to invest, somewhat cautiously and only in defensive stocks. We have to play this game even if we don't feel very good about the market," Smith said.
If markets continue to climb without fundamentals catching up, stocks will end up entering a bubble territory, said Roberts—something he doesn't see as a danger until late 2016 or 2017.
"We are in the final stages of a bull market—the melt-up stage. Until then, I will remain half-bullish," Roberts said.
Posted by: JM Bud <jmbud2@gmail.com>
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