A few months ago, we had several threads making bear case predictions.
Now we are bullish?
Wouldn’t surprise me if, in a few months, something unexpected happens (which always does) and sentiment flip-flops again.
Well, there is an Italian election coming up in October/November time frame which could directly influence the future direction of the EU 
On top of that, I’ve been paying attention to all the latest conspiracy theories, something I find very entertaining. The Republicans are making a case that Hillary Clinton has dementia, early onset alzheimers, ta da. It is known that she had a serious concussion a few years ago and had a blood clot in her brain. She also has a neurologist following her around, has been seen falling down and unable to walk without assistance, head bobbling during an interview, also eyes glazed over. Now I’m sure a lot of the youtube footage is cherry-picked to make her look bad. There was a leaked doctor’s report that indicated dementia but no one is sure if it is real. Supposedly, the leak was traced to a PC owned by the father of a worker in the clinic. The father was mysteriously found dead the day after the supposed leak. One of the mysterious deaths surrounding the Clinton’s that are being tracked. In any case, what I find curious is that there has not been any denials by the Clinton camp regarding the health problems, and there is an eerie silence in the media. I thought they would be reporting on all her campaigning - is she actually doing any? This all seems kind of bazaar for this close to an election.
Steve
Andreas,
Your chances of being right one this one just increased.
How about we all have a P123 meeting in Colorado after the election? If you want to go to a different state then maybe I can treat everyone’s glaucoma.
Seriously, what a prediction if you are right.
-Jim
Jim, are you Colorado based? I just been there 2 Weeks (after beeing there the last time 1999 and 1993 (in 1993 3 Months).
It was a blast, fall in love again to the states in general but especially in Colorado.
I will be back
Well, we are not there yet with Trump. If he wins, I hope he is not dividing the country even more.
What really fall in to my eyes beeing 2 weeks in the US as a foreigner, that MSNBC, NBC and FOX are totally
subjective. They basically fight for Trump or Clinton, no objectivity at all, not even the attempt to be objective (there
is no real objectivity, I know). And I have to say, Trump is right, that there is much more media beeing subjective
for clinton then for him (by the way, as almost every european, I favour clinton). All news papers and the most
part of TV have been for Clinton full blown, not for Clinton but to hinder Trump. A bad strategy, since people
do not like to be influenced with a hidden agenda that way.
Observations: gas is cheap, cars too, but food is very expensive, 7 bucks for a pack of salami, thats a third in Germany.
Houses expensive as well (at least in Denver), as expensive as in Germany, but we got brick houses instead of wood.
If I wold life in the states I would definitly go into building houses by my self.
As always, very, very friendly people, I loved it!
Green energy seems to pick up.
By the way, I think the rest of 2016 and 2017 is going to be great (going up), we might have more vola in November and beginning
of dec, then the bull will kick in! THE BULL WILL COME 
Andreas,
Not in Colorado. Just referring to Colorado, weed and Steve’s comment. And I do not smoke or prescribe it.
I think if I or anyone makes predictions on P123 we should keep track of how we are doing. The more specific (i.e., can be proven false without fudging) the better. Your prediction is very specific. Being right, considering the polls and other things, would be pretty impressive.
So true. Interesting on your other observations (e.g., prices).
Pretty impressed with your models and quick take on America. Hope you are right about the market.
Best,
-Jim
Trump is president.
Market is up.
Euro is down.
My port is up 3%.
Love it
Bullish for the rest of 2016 and until May 2017.
Love it: I meant that my port is up
https://www.portfolio123.com/fed_model.jsp
We just hit an all time high in earnings (even they are estimates, the market does “listen” to that estimates).
And so far the IWM did not crash by the way.
And the nasdaq (QQQQ) hit all time high (after 17 Years!!!) as well:
“Whenever a market hits an historic high, its telling you something.”!!! Lary Hite (Market Wizzard).
Long since Feb 2016 and still long.
And the tape (especially the political one) can not be worse. I read the Spiegel (German left to liberal “Newsweek”) since I am 14 (I am 47) every week, and
they postpone amagedon twice a year, but such a mood I have never encountered.
I recommend the following, videos are a bit slow and therefore tend to be boring but
the message is very interesting!
https://twitter.com/CiovaccoCapital
As always things can change quick and a pullback of 20-30% can always happen, but right now odds are high we go higher from here.
Regards
Andreas
My $0.02:
Nobody knows the answers (obviously), but the big questions remain the same as do the reasons why either bull or bear can happen. As always, it’s about expectations of future earnings (and all that relate to it; sales, cash flows, etc. etc. etc.) and multiples. There are two things we knew and still know:
-
Multiples, a big driver of the long-term 1982-2005 bull market can no longer support any bull case. Going forward, multiples will have a neutral or negative impact on the market. That’s just interest-rate math; notwithstanding some overnight rates here and there having been renamed overnight fees, the reality is no homeowner is going to take a mortgage and have the bank pay him 5% annually, and no consumer is going to receive 15%-20% annual payments from the bank for the credit card debt they continue to hold. Those are what it would take to continue to drive a bull case based on expanding multiples.
-
Earnings might but probably won’t continue to rise as they had during the great bull market based on productivity and cost cutting. While productivity gains can and probably will persist indefinitely, we’ve already come a long way since 1982 and are likely already experiencing the law of diminishing returns (where every new dollar of investment produces less and less benefit – this is a well-established economic principle, and something we can observe on an ad hoc basis). As to cost cutting, economically that remains on the table, as always, but it has lost a lot of political luster and seems to be becoming downright unacceptable politically.
Here’s the big unknown, positive early expectations regarding which have been driving the Trump rally.
- Can Trump’s populist sentiments translate to policies that get more of GDP to trickle down to John and Jane doe and can that get them to spend more and pull monetary velocity out of its continuing and getting-scary free-fall?
I have no idea if Trump can succeed. But I do find the political shift real and likely to take on a momentum of its owns, and if Trump can’t deliver, then one or more or many more will have to even if it takes a few more election cycles and both the executive and legislative branches turn over as little or as dramatically as they must for it to happen.
In financial terms, it’s, as usual, P = E/(R-G).
In the past, P soared because of dramatic declines in R and gains in E and G that were but no longer are politically palatable.
Going forward, R is stable or rises but could, and I suspect will, be offset by gains on E and G that will be politically more sustainable, and perhaps even downright enjoyable. So I’m leaning on the bullish side of the fence.
The risk is that as we transition from one world to another (or as quants would say, one regime to another), there will be ample opportunity for misunderstanding, misinformation, pushback, etc. and that could lead to some nasty spells for the market.
Anyway, I discussed some of this in terms of economic charts last week on Forbes: http://www.forbes.com/sites/marcgerstein/2017/01/30/an-investment-rather-than-political-view-of-trumps-rhetoric/
The bull case was right so far (sorry for braging). Keeping the bull case up to the Q1 and Q2 of 2018.
Stocks should do well Q1 and Q2 of 2018, but volatility will be back. that is my call.
Staying flexible, as soon as the 75 ma of the sp500 is broken and earnings trend down, I am 100% in cash.
2016: 58%
2017: 32% so far (small caps did relatively poor, but fine with this, they will be back!!!)
Bull Market Phases: Only a few will see improvement, 2nd stage: most people say it gets better, 3rd: everybody says everything gets better for ever.
In which stage we are?
First of all, I think it is a secular bull market and the next 20 Years look good seculary. (Read his second book: https://twitter.com/jposhaughnessy
https://www.amazon.de/Predicting-Markets-Tomorrow-Contrarian-Investment-ebook/dp/B004IATDG0/ref=sr_1_1?ie=UTF8&qid=1512230323&sr=8-1&keywords=predicting+the+markets+of+tomorrow
As always I am a bull for the US, since demographics look (relatively) o.k. and a whole lot of other thinks I do not want to get into…
Also I like the following analysis on “good times are coming”: https://twitter.com/CiovaccoCapital
- I believe we are at the mid of stage 2, most (really, and that is even a stretch, from what I hear still
everybody feels the trauma of 2008 and is one step out of this market; I am not sure here) lets say
most people say it gets better, but only on the light tone.
Who is cool right now? the pessimists or the optimists? Id say the pessimists and that
tells you this (US) market is going up and the pain trade is up.
Hope this will happen and I hope we get a good 2018!
Best Regards
Andreas
the bitcoin call was right (the gold one was not, but this can still come), I event traded them for a 600% win, but I could have made 1800% and I sold the way up to the 600% gain.
if I would have hold, I would have now 800k more in my port, but I only made 80k.
Though it is ok., since I can make some more sain money with p123 and I did not want to get distracted. I does not hurt and
this tells me I am on the right track…
Also another correction: if we get an inverse interest curve, I am into cash also!!!
Regards
Andreas
P.S. I am planing to come to the US in Spring 2020 (Denver or wherever we can organize a good p123 convention, if p123 does not support it
it will organize it privatly without p123
Regards
Andreas
Andreas,
When the Forward Rate Ratio between 10yr and 2yr yield gets to 1.0 then you have an inverted yield curve. Check my weekly plot and see how it is diving towards the 1.0 line. A recession always follows then, then go to cash.
https://imarketsignals.com/wp-content/uploads/2017/12/Fig-3.2-12-1-2017.png
Deleted
Thank you Georg!!!
Georg,
I notice that the signal provided by the configuration on your FFR2-10 indicator gave a very early warning (August 2006) for the last market downturn, which started in late 2007 (October-December, depending on the index). I’m sure that you are not advising to exit the market more than a year ahead of a downturn. Do you use this indicator for market timing – or has it evolved and/or is there is a more accurate indicator you use today?
I know you have multiple market timing indicators on your site. I guess I’m wondering which one(s) you hold in the highest regard?
Thanks,
Chris
Chris,
The FRR2-10 is indicative of the slope of the yield curve between the two-year and the ten-year note yields; a FRR2-10 less than 1.00 indicates an inversion of the yield curve (two-year note yields are higher than ten-year note yields).
Six month ago the FRR2-10 was at 1.081.
https://imarketsignals.com/wp-content/uploads/2017/12/Fig-3.2-12-1-2017.png
End of May-2018 level is 1.044. If one forecasts the forecast, assuming this trend to continuous, then the yield curve will invert by the end of this year. Based on past history (for the last 7 recessions, since 1967) the lead time to the beginning of a recession averages 14 months from the time FRR2-10<=1.0. That would indicate the next recession for early 2020 (just in time for the next presidential election). Past stock market history also shows that getting out of the market longer than 5 months before a recession is going to be counter-productive.
I don’t use the FRR2-10 to time the stock market. The iM-Composite Market Timer is probably our best timer, but it does trade frequently. Since Jan-2000 there have been 72 realized trades.
https://imarketsignals.com/2016/composite-market-timing-increases-returns-and-reduces-drawdown/
Ok, thank you, Georg. I didn’t realize that the signals were intended to give the warning 14 months in advance of a recession. It looks like it has a fairly large range (39-87 weeks) before recessions begin, but just receiving a signal from the FFR2-10 allows one to be alert for signals from more timely indicators.
Have you considered combining the two indicators; i.e., the accurate FFR2-10 and the iM-Composite? Seems like then you would have a highly accurate AND timely composite indicator.
Chris
Chris
The one year lag in the inverted yield curve prediction can also be found in the Federal Reserve published research. From “The Yield Curve as a Predictor of U.S. Recessions”; “The yield curve—specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill—is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead.”
Actually, the research papers attach a probability for a recession given the steepness of the yield curve inversion.
https://www.newyorkfed.org/research/capital_markets/ycfaq.html
Walter
Chris,
keep in mind that a timer for recessions is only one show in the whole drama. There have been horrid market crashes WITHOUT recessions (1987 comes to mind). A recession timer surely helps but it is only one tool in our toolbox.
Werner