zondag 23 juli 2017

"Easy Money"?

Past week as Yellen uttered the two magic words: ‘EASY MONEY.’ Okay, it wasn’t exactly two words. It was actually: ‘Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.’ In other words, by saying that interest rates would not have to rise much further, the markets translated that to ‘lower interest rates for longer,’ confirming the Federal Reserve will remain “highly accommodative” to the markets so, therefore, ‘buy stocks.’ And with that, the robots leaped into action pushing markets OUT of the month-and-a-half long trading range of just 1.5%. This push to new highs, as noted above, also triggered a short-term ‘buy signal,’ at the bottom of the chart, which suggests this rally should continue higher over the next week, or so, heading into the month...


“With the break above 2452 on Friday, assuming it will hold above that level into next week, it will provide an opportunity to increase short-term equity allocations in portfolios. However, be mindful, this is VERY short-term in nature and could be quickly reversed, so manage your risk accordingly.” As stated, this analysis is VERY short-term in nature. Price trends are currently positive which keeps portfolios long-biased for the time being. However, while our portfolios are “bullishly” positioned for the short-term, we remain much more pessimistic about the longer-term return dynamics. I want to spend the rest of this weekend’s missive analyzing the ongoing bull thesis that has been pushed out by the media recently....