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We concluded our Market Commentary yesterday with the statement that “we always advise moving incrementally so if you are feeling uncomfortable with the recent downside moves, take a bit off the table but refrain from ’all in’ moves.” That is not just a “feeling” but a result of taking a look at the BOND market as well as the stock market. What we are seeing is spreads between bonds with differing credit ratings has not widened which would have indicated a bigger problem as they did during late 2008 and early 2009. There is also much evidence of an economy that is recovering rather than moving toward a recession. Once again, different from the time period referenced above. Earnings reports as well as the outlook provided by U.S. corporations has also been positive.
We have noted that there will be enough good news to offset the bad news OVER TIME. That said, on any one day or over any short period, the market can be very unpredictable. At this point in time, investors are deciding whether or not the recovery is sustainable. We believe that over the next several months this will turn to how strong the recovery is. With this in mind, we are sticking with our belief that investors lack faith in the recovery and, due to the pain from the last bear market, are quick to pull the “sell” trigger.
That said, we will keep an eye on market levels and referring back to our intial statement, move incrementally.