While the Fed raised worries with talk of raising rates in the future, should unemployment stay below 6.5%, in the long run it might be the best thing for this market to normalize.
We have had interest rates near zero for 5 years now. Flash back to 2009, March with the S&P at 666, the Dow at 6500 and a complete liquidity crisis.
60 months later, the indexes have more than doubled. 2013 saw 30% returns in the market, while the “inflation” hedge ( long commodities and gold) had a negative 30% return.
The S&P is in a nice channel upward going back to December of 2012. While its a wide channel, the trend is decidedly up. We could actually trade back dow to the 1600 level and still be just “neutral” on a technical basis. Just food for thought as we undoubtedly are looking for a volatile ride here. I’d be more interested in the bigger picture for stock indexes, which suggest that the trend is up, the majority of retail investors are still on the sidelines, and we continue to climb a wall of worry and dis belief.
As for the fed, they have been signaling for 8 months now that this day would come. It makes me think of how a parent has to prep his 5 year old for bed. The old 10 minute count down. The fed has been giving us this count down, literally in baby steps. The market is wrapping its head around the idea that interest rates can’t stay at zero for ever.
We’ve already seen the Japanese and Chinese back away recently from being ready and willing buyers of our debt.
I think it makes sense to be cautiously bullish the markets, using the no doubt frightening sell-offs we will be living through, as buying opportunities. For now, there are too many pro’s trying to call the market top; too many individual investors staying away from the market for this to look any thing like the Nasdaq at 5000 back in 1999.
I sure could be wrong. However, it feels more like a volatile trade, rather than a blow off top. As long as 1600 holds in SPH, I think the dips offer buying opportunities.
Short term , catching the sell offs could be lucrative as well. Take a look at this chart, and you can see, graphically, how the S&P has been traveling up this channel on the charts.
CER
