Wednesday, November 29, 2017

This Week's Message: November Highlights

No doubt, there'll be plenty to cover here on the blog over the next few weeks. However, it's likely to come to you in small bites as it's time to begin formulating our more robust year-end commentary. 

We presented last year's message in three parts: In part one we reviewed past results, touched on valuations globally and expressed our concerns regarding the bond market. Part two covered our then assessment of the economy. And in part three we presented our view of prevailing market conditions at the time. 

Here are snippets from parts two and three which pretty much summed up our view of probabilities heading into this year (along with the usual lecture on volatility):

SUMMARY (from part 2):

In viewing the above chart patterns relative to prior recessions, it's easy to feel good about the U.S. economy's, and, by virtual default, the U.S. stock market's prospects going forward. Although I must reiterate the point I made in my introductory paragraph: history is replete with examples of down markets during economic expansions and vice versa (we'll assess the present financial markets' setup in detail in Part 3).

I must also add that my view of the economy's prospects is merely based on all information I have at my disposal at this particular moment. Meaning, trends come and go and we have to forever be on the lookout for signs that they are reversing. Our aim is to maintain sector allocations that, at the margin, reflect the most likely macro scenario going forward -- while maintaining proper balance and diversification at all times.
And from the opening paragraph to part 3: 
In parts 1 and 2 we touched on 2016's winners and losers, equity valuations, the present risk in bonds and an economic backdrop that strongly suggests that a recession is not something we should be presently losing sleep over. So, in terms of prevailing market conditions, we've already seen a picture that inspires optimism over the prospects for economic growth and, thus, corporate earnings growth going forward.
So, based on what we've experienced in the equity market and the economy during the first 11 months of this year, it appears as though our analysis accurately captured the overall setup going in. 

Look for part one of this year's message to hit your inbox around mid-December.

As for this week's message, we'll simply offer up the titles of the entries into our November 2017 trends file. Separate from the thorough technical and fundamental analyses we perform at the beginning of each week, we collect and file away additional data that we find instructive in shaping our view of probabilities going forward. 

Bottom line: On balance, the following confirms our bullish assessment of current conditions.

Have a nice weekend!

Feel free to shoot me an email if you'd like to see what lies beneath any of the titles below:

Click to enlarge...

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