One of the classic Wall Street sayings is: “As January goes…so goes the rest of the year”.
So with the market pressing to new highs right out of the gate in early January, that certainly seems to bode well for 2021. However, let’s remember that the market has risen over…
70% in the past ten months. So the easy money has been made and we need to be a bit smarter to find those extra returns going forward.
Gladly our 2021 game plan is playing out quite well as the Reitmeister Total Return portfolio has already risen +5.75% in the new year which is nicely ahead of the 1.20% return for the S&P 500.
In today’s commentary we will spell out more details on the current market environment, our game plan to stay a step ahead of the pack, and details on our individual positions.
Why did the market bounce in March 2020 in the midst of the Coronavirus recession?
Why did stocks rally +71% from the market low into the 2020 close?
And why is the environment still bullish today?
The answer to all 3 questions is the same. And that answer is TINA.
Alternative…to owning stocks.
We have talked a lot about TINA and how the low rate environment continues to skew things in favor of stock ownership. That is why rising coronavirus cases don’t matter to investors. Nor does riots on the US Capitol.
However, in yesterday’s Members Only Webinar we talked about it from a new angle. That being my desire to answer this vital question:
Are We in the Midst of a Stock Bubble?
The answer is Yes, But…
The yes part is to say that on most historical measures of value we are either close to the bubble levels found in 1999 if not worse. But, there is one measure of value that tops them all. Of course, I am talking about Earnings Yield which shows that stocks are MUCH more attractive than bonds. Like 4X more attractive. This is why stocks will continue to rally this year until this value relationship deteriorates.
Again, you are cheating yourself with this short hand version of the TINA, Earnings Yield and Market Bubble explanation. See it in depth in Monday’s Members Only Webinar.
OK… two more things worth discussing this today. First, is a quick roll call of the key economic data points. Almost all are positive. Yet there is one negative that deserves to be on our radar screen in case that weakness appears in other places.
ISM Services on Thursday showed similar gusto as the ISM Manufacturing report earlier in the week. Here we see it rally up 55.9 last month to 57.2 this time around. Also New Orders accelerated to 58.5 which bodes well for future readings. So hard to complain about the direction of the economy when both ISM Services and Manufacturing are recovering at such a strong pace.
Redbook Weekly Retail Sales report was solid again with +2.1% year over year gains. So the good vibes from the holiday shopping season have extended into early January.
Now for the bad news. Today the…
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