The market overall, including technology which we watch the closest, has been doing essentially what many (like GaveKal) figured it would.Â The debate about whether this is the start of a bull market or just a bear market rally rages on; at least for the US markets.
After spending two weeks in the US it’s clear that fundamentals are still pretty lousy and sentiment about job availability and the economy is low.Â (It’s anecdotal evidence to be sure but it’s better than guessing.)Â Everyone knows that the “market discounts current events and trades on future expectations” which now seems to be:Â things have stopped getting worse and could get better.
Based on all the available information we see there is nothing in the short-term that seems likely t0o change the direction of the current rally.Â Â Stocks may take some time consolidate the recent gains.Â Companies seem to be making their much-lowered March numbers which would support current prices.Â Right now it seems doubtful that they will have better visibility or raise expectations when they report.Â Still that’s consistent with the “it’s not getting worse and will improve at some point” market view.
Investors tend to forget seasonality and this may be true again with real estate.Â With lower prices and very low mortgage rates the market seems to be getting more robust.Â Rates this low will continue to help.Â The other factor is that many sellers have been looking at this Spring selling season as a “must sell” opportunity and properties we know of will be marked down to move them before the summer.Â When combined with low rates it will be tempting enough to make real estate look even better.Â This should provide more positive news and keep the pressure on to put money into the market.
Pundits scour the horizon for negative events to be concerned about. The collapse of some of the Eastern European economies is on the list, so is the potential for a negative G20 meeting next week that could lead to more protectionist measures.Â Neither feels like it is enough to change the direction of the US equity markets in the near term.
We’re not suggesting that we wouldn’t be cautious but only that this doesn’t appear to be the time to exit the markets.Â We still see the market in a very stock-specific way and continue to believe that technology offers one of the best sectors to be in during a tough, cost-sensitive environment.Â More detail on that can be found in our post from a month ago.
It feels good to bask in the gains that have come from the lows in November and the March rally.Â However a good rule of thumb is:Â the better you feel, the more worried you should be.Â Â From a stock standpoint the approach remains the same, focus on the fundamentals, cash flow, return on invested capital and valuation; they will keep you when the market sentiment gets to you.