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I find myself quite nervous about the stock market lately for a few reasons.
First, the S&P can’t seem to make any progress. We are essentially flat for the last 5 months.
While some stocks such as DIS, SBUX and NKE continue to make new highs, other important leading stocks seem stuck in the mud such as GOOG, PCLN and FB.
Second, earnings growth is anemic. The Wall Street Journal reported this morning that with 417 companies reporting, 1st quarter earnings growth for the S&P is 0.2%. PCLN this morning reported anemic net income growth of 3%. GOOG wasn’t much better at 5%. FB’s EPS were up only 20% after 7 straight quarters of monster growth.
Third, we are late in this economic cycle. While I expect the Fed to be gentle, it is likely they will raise interest rates at least once sometime this year. It may not be until September but the monetary tailwind that has powered stocks will be diminishing somewhat.
For all these reasons I find myself tempted to cut our exposure to the market somewhat in the days and weeks ahead without doing anything drastically bearish. Technically, this market is still strong and should be given the benefit of the doubt. But more and more I find myself feeling anxious moving forward.
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
Bay Area, CA