Recent polling shows money managers see trouble ahead. Reasons include: a lofty stock market valuation, a muddy economic outlook and polarized political landscape. Any of those three could hurt the market ahead. The polling showed that only 27% of the managers were bullish about the market’s next twelve months compared to 56% a year ago. This is the lowest percentage of bull-market sentiment in more than 20 years.
Bear’s have surged in their ranks too, to levels we haven’t seen since the 90s. Thirty-one percent were bearish and a whopping 42% were neutral.
As for next year’s growth GDP rate, the majority of the managers responded that they were expecting 2% growth or less. This is concomitant with 2019’s performance. A third of managers see a recession in 2020 and nearly two-thirds don’t expect one until 2021 or later.
It seems the market is trying to prove that the tariffs have not negatively impacted the stock market. This week the market has been hitting new highs on the S&P500. Tomorrow, we have exceedingly low unemployment numbers. Many are forecasting the number to tick up to 3.4 from 3.3. This is where the economy hasn’t weakened. Jobs and the consumer sentiment have stayed very strong. I believe that, if this can remain consistent, then the market will tread through the next twelve months and lift back up at the end of next year.
There is a belief (which I haven’t completely bought into), that forecasts the market finishing strong this year and then dropping the first quarter or two of next year. Current earnings for the third quarter show blended earnings decline of 3.7% for the S&P500. If this holds, it will mark the 3rd straight quarter of declines since 2016. Adding to confusion in the market place is BREXIT, where the hot potato has been passed again. The trade war will come in phases. The deal has been introduced and most likely won’t be released until November or December.
Remember to filter out the noise from all the media and hype. Stick with your strategy and stay disciplined. It’s fine to change your strategy as long as you do it based on decision points. Right now, our portfolios are 50/50 due the negative economic reports and the positive consumer strength and are also based on the effort by the Federal Reserve through their interest rate mid-cycle adjustments.
If you are looking for some buying opportunities Alphabet and Amazon are worth buying on the dip. Both had earning misses and are now at a discount.
If you have questions on a particular company or investment and would like our feedback, contact us at my email below. Our team will research and respond to you with our recommendation and opinion.
Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC
For questions or investment topics please email me [email protected]
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