Bulls Ignoring Corona et al
Good Friday Morning!
Sorry I have been AWOL this week. Between the holiday on Monday and being in Boston on Wednesday, my schedule has been jam packed. Amazingly, with full on impeachment and the Coronovirus, stocks did not even hiccup this week. And that’s still with an historic level of greedy sentiment that just keeps on getting more extreme. One thing is for sure and that’s something I have said forever; price is the final arbiter. That means that nothing is more important than price in the end, no matter how poor sentiment is or fundamentals or anything else. In other words, it doesn’t matter until it matter and then it will matter in a big way.
The major stock market indices haven’t changed. Every index except for the Russell 2000 is making all-time highs. And said Russell isn’t that far away, so it’s not a huge concern. On the sector side, semis and discretionary are making fresh highs. Transports remain constructive and I believe all-time highs are coming. Banks look similar but a touch weaker. I am not that worried here.
High yield bonds are still behaving very well and they are usually among the first areas of concern to develop. While they have pulled back a bit, they recently hit new highs, confirming the strength seen everywhere else.
A short-term pullback is long overdue and everyone is looking for one. However, remember one of the market adages. When it comes, investors will either not buy the dip or it will be the dip that they finally shouldn’t buy. Right now, I am betting on the former.