It’s hard to turn on the TV, pick up a newspaper or magazine and not see at least one piece concerning the lofty level of the US stock market. In fact most include a piece or 2 about the high price of US stocks and that stocks are due for a sell off. Some point out it’s been 18 months since the last 10% or more correction. Others write that strong corporate earnings from the last quarter of ‘16 and the first quarter of ‘17 are a mere set up for what is bound to come out over the next few weeks; lower corporate earnings thus leading to even higher stock valuations and a certain stock market sell-off. Are markets frothy? Does the geo-political landscape seem a bit uncertain maybe even unstable in some parts of the world and do such uncertainties broaden the risks to the stock market? Not trick questions.
Market corrections are part of economic cycles and should be expected. Just look back to April’s Market Update. I’ve written many times about understanding personal tolerance for risk, knowing when some or all invested assets may be needed and most of all to watch trends. And on that subject, one I follow faithfully is the Purchasing Manufacturing Index or PMI. A monthly report showing how good or bad the US economy is doing from one month to the next by measuring 10 key components of US manufacturing. Generally speaking, a reading over 50 is an indicator of manufacturing expansion. The July 3rd report came in at its highest reading in nearly 3 years. Do I hang my hat on this one piece of data or do I use it as part of a process to evaluate overall market and economic headwinds that lie ahead? Again, not a trick question. Incidentally, I find it a bit ironic this positive economic data point is barely given a whisper by mainstream media sources. I guess it’s true fear sells more TV ads and magazines.
I see volatility rising in the weeks ahead but the bull is still in place. Until next time…………………
……………………………………stay nimble be tactical and know what you own.
These are the opinions of Randy L Miles Sr and not necessarily the views of Cambridge. They are for informational purposes only not to be construed or acted upon as personal investment advice.