Thank God is all I can say. After going up every month of the year, the market is finally set to close with a losing month. The count is nearly over and unless we have a 91 point Dow up day Friday or 17.5 point move in the S&P 500, the market will have its first down month this year. And it couldn’t come a moment too soon for most money managers.
We are all tired of getting our butts kicked by passive index funds and part time investors. There is an old Wall Street saying, “There’s no need for an analyst in a bull market and no one wants to hear from one in a bear market.” I know traders like myself are all breathing a sigh of relief. Volatility and anxiety couldn’t have come a moment sooner. There’s nothing I fear more than a bull market. But could it really be over?
I don’t think so. I still believe we are headed toward S&P 1815 very possibly by the end of the year. Why? It’s simple; stocks are really the only game in town. Bond volatility raised its ugly head last week. There was the stench of primal fear in the bond market. Real Hunter Thompsonesque terror. I heard the fear in the voice of shell-shocked prospects no longer smug and content in their ‘safe’ basket of bonds. As for the gold bugs, I think they got the word from their doctor telling them they had terminal cancer. It was as ugly a market for non-correlated assets, like bonds and gold, as I have seen in a lifetime. BTW-all of that is good for stocks.
Now for the big competition. Real estate is ratcheting up again to be real competition for the only game in town. Small fortunes are being made by ma and pa flippers and large bets are being placed by hedge funds who bought up bank owned property. How long will this continue is anybody’s guess but rates have not risen enough to snuff out the speculative frenzy. Lending standards are still absurdly stiff. The economy is getting better but is hardly robust. Still real estate will not be stiff competition for years to come. The memory of collapsing home values is still fresh. The millennial generation is practically broke, saddled with large student loans and perfectly content to watch the world go by from their smart phone and not their living room. There is going to be a structural imbalance between sellers and buyers of larger homes. and a heavily indebted upcoming millennial generation will keep the boom in check.
So if you missed stocking up some AT&T yielding 5% or neglected to pick up some Kinder Morgan as Richard Kinder did when he scooped up $17.8 million last week, you may still have another chance. Stocks sell off hard on the slightest miss in earnings after the big rally this year. Earnings season starts in earnest in a couple of weeks and there will be plenty of misses to pick through.