09-12-2017, 10:59 PM
Still, Goldman says fear not, for a couple of key factors are still working in favor of a prolonged stock market expansion. The first is a lack of investor euphoria — the type of unabashed confidence that has historically left bull markets vulnerable to sharp downturns. Goldman cites cash positions of 3.2% for mutual funds, which is in line with the historical average. If there were an overabundance of confidence, this measure would be far lower, with more capital in play. "Investors today are situated between skepticism and optimism," a group of Goldman strategists led by David Kostin wrote in a client note. "Few are euphoric as 27% of core managers are beating their benchmark. 'Tormented bulls' best describes investor mentality." A second factor that should keep the stock market afloat is persistent US economic expansion, Goldman says. The firm specifically cites strong monthly job growth, rising wages, confidence at its highest level since 2001, and household balance sheets that are their strongest since 1980.
GOLDMAN SACHS: 2 big reasons stock market is safe from correction - Business Insider
The global economy is running on all six cylinders. It may not be a global synchronized boom, but it is the most synchronized expansion of economic activity that the global economy has had since the recovery from the 2008/2009 recession. The direction of change can be seen in the titles of the past four issues of the International Monetary Fund’s World Economic Outlook: “Subdued Demand: Symptoms and Remedies” (Oct. 2016), “A Shifting Global Economic Landscape” (Jan. 2017), “Gaining Momentum?” (Apr. 2017), and “A Firming Recovery” (Jul. 2017). Why is this happening now?
Dr. Ed's Blog: Global Synchronized Growth: Why Now?
“Why did it take me so long to update my beliefs in the presence of repeated disconfirmation? I had a thesis: that the elevated corporate profit margins I was seeing in 2011 would fall back down to past averages. Reality told me that this thesis might be wrong in 2012, when the prediction failed to come true. Then it told me again in 2013. Then it told me again in 2014, and again in 2015, and again in 2016, and again in 2017. Was all of this repetition really necessary? Could I have been more receptive of the message the first time it was presented?” Winning in the investing game isn’t simply about having true prior beliefs about the world. It’s also about efficiently updating those beliefs in response to feedback from reality.
Profit Margins, Bayes’ Theorem, and the Dangers of Overconfidence | PHILOSOPHICAL ECONOMICS
Hong Kong’s Financial Secretary Paul Chan warned potential buyers to be careful buying property in the world’s most expensive housing market, as moves by the Federal Reserve to unwind its balance sheet may shrink money supply.
Hong Kong Finance Chief Warns Again of Property Risk as Fed Acts - Bloomberg
Investing is a forward-looking endeavor. Investors need to build a portfolio for the economy that lies ahead, not the one in the rearview mirror. Unfortunately, the view of the road before us is murky at best. History is not very helpful either, as the global quantitative-easing experiment has never been attempted at its current magnitude. How can investors prepare for the consequences of such engineered, inorganic growth? To paraphrase Warren Buffett, “To finish first, first you need to finish.”
This should be your No. 1 criterion when buying stocks now - MarketWatch