The market pundits and technicians have pointed to everything from the “sell in May and go away” rule to the election year rule to the deja vu phenomenon to confuse the crap out of investors who are looking to make some sort of tactical asset allocation move in their portfolios some time soon.
Amid all of the confusion, Liz Ann Sonders, Charles Schwab’s Chief Investment Strategist, has a maintained a bullish slant.
“I don’t think the present correction is over, but do believe it could be kept to within the normal 5-10% range. Since the current bull market began in March 2009, the S&P 500 has had 15 corrections of more than 5% that were preceded by at least a 5% rally (consistent with this year’s pattern),” she wrote in her latest strategy commentary
- Inflation is coming down, especially among commodity prices.
- Credit growth is quite strong, especially for consumers.
- Housing has improved markedly.
- The US manufacturing sector is humming.
- NFIB’s small business survey made recent upside breakout.
- Job growth is much better.
- Consumer confidence is improving.
- Private-sector leverage ratios are much improved (debt servicing costs are extremely low).
- Recovery in state/local government spending.
- The US economy somewhat decoupling from rest of world; at least Europe.
- US bank capital/health is much better than Europe’s.
- The European Central Bank’s Long-Term Refinancing Operations have reduced likelihood of global financial contagion.
- Germany appears more willing to accept higher inflation, opening the door to easier monetary policy for the eurozone.
- Valuations are quite cheap, especially on forward earnings.
- Investor sentiment has improved sharply with the correction to-date (meaning pessimism has kicked back in).
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