Great advice in life, and probably good advice in your investment decisions.
With the exception of Apple, the so-called FAANG stocks are down sharply over the last four or five weeks:
Facebook (FB) -5.23% since all-time high on July 27, 2017
Apple (AAPL) -1.63% since all-time high on August 16, 2017
Amazon (AMZN) -12.74% since all-time high on July 27, 2017
NetFlix (NFLX) -13.34% since all-time high on July 21, 2017
Google (GOOG) -7.32% since all-time high on June 6, 2017
These same FAANG stocks have been the main source of strength for the current bull market since its beginning in March 2009. Is weakness among these key leaders a credible warning sign of trouble ahead for the broader market?
The benchmark S&P 600 Small-Cap Index is actually DOWN 1.23% on the year now after being UP almost 5% exactly one month ago! With small-cap stocks and transportation issues now significantly under-performing the broader market, is the larger-cap space now vulnerable to a major correction? Just one look at the negative investment returns from the mega-cap FAANG stocks over the last month should provide the answer you need!
Here are some of the bullish arguments that many uninformed Wall Street pundits are now making to justify a fully-invested position in the U.S. equity market:
1. Long-promised "tax reform" from the Trump Administration is coming soon! Treasury Secretary Mnuchin and NEC Director Cohn are both saying that meaningful tax reform with significant tax cuts will be legislated before the end of THIS year
2. Corporate earnings will continue to "surprise" on the upside
3. With domestic interest rates still historically low, stocks are really your only place to earn "decent" rates of return
Other bullish reasons include ongoing corporate share buy-backs, relatively easy domestic and global central bank monetary policies, and positive forecasts for domestic and global economic growth.
If I had confidence in any of the above bullish arguments, I might be bullish too! However, in my view, every one of the bullish arguments listed above are shaky at best and not realistic (or completely false) at worst!
The tide has turned for this 100-month bull market, and a new bear market has already quietly begun. The music has stopped! The dance is over! And it's time to exit stocks with all your well earned profits!
Perhaps it's worth remembering that in 1987 the S&P 500 Index topped out on August 25th and then it fell 35.94% over the next 55 calendar days! Reasonable bearish arguments include the following:
1. Seasonal factors look negative for U.S. stocks over the next several months
2. The U.S. Federal Reserve is threatening tighter monetary policies over the next several months, including another possible rate hike and partial liquidation of its bloated balance sheet for the first time since the bull market begin in early 2009
3. The Russell 2000 Index is currently trading at 88 times trailing twelve month earnings! While the S&P 500 and Nasdaq Composite Index are trading at a more reasonable 25 times trailing earnings, I think it's a fair statement to suggest that the overall U.S. stock market is currently "priced to perfection" and is therefore vulnerable to any disappointing news on the near term horizon.
4. The Trump Administration appears dead set on starting a trade war with China.
5. A misstep is very possible by the Trump Administration in its handling of the escalating "cold" war on the Korean Peninsula. North Korea appears embolden recently in its challenges to President Trump's threat to using overwhelming force to stop North Korean from continued development of its nuclear program.
6. The Trump Administration appears to be signalling a possible shut down of the U.S. Government if funding for a southern border wall is not provided in the upcoming budget negotiations.
4. The Trump Administration appears dead set on starting a trade war with China.
5. A misstep is very possible by the Trump Administration in its handling of the escalating "cold" war on the Korean Peninsula. North Korea appears embolden recently in its challenges to President Trump's threat to using overwhelming force to stop North Korean from continued development of its nuclear program.
6. The Trump Administration appears to be signalling a possible shut down of the U.S. Government if funding for a southern border wall is not provided in the upcoming budget negotiations.
7. And most important, in my computer trading system, Weekly Chart Sell Signals are now in force in almost every major benchmark U.S. stock index!
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| S&P 500 Index Weekly Chart with Computer-generated Buy & Sell Signals |
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