My key indicators continue to strongly suggest that the adjustment process for the economy, inflation, forward profits, and valuation levels still needs more time to reach readings that flash compelling for strategic equity investors. I have no doubt that a compelling buying/risk-on opportunity will occur, and that it is still in front of us. Patience will reward the investors who have dry powder to put to work once my key indicators approach bullish contrarian readings, which will be when the reward-risk ratio has once again flipped back to reward.
On the surface, the equity markets are trading as if danger levels have receded, and they are shifting towards a new bull market. Despite what the S&P 500 is flashing, my fundamental research does not support this conclusion. The signals they are flashing are that the level of danger has RISEN.
Thus, I continue to reiterate that bounces should be viewed as bear market rallies that will likely fail and should be used to sell into, reposition, raise hedges, and to reload shorts. Any tactical gains or outperformance for now are just side shows, while the MAIN EVENT of pivoting for THE bottom is still on the horizon. For relative investors, my work still sees attractiveness in a mix of Defensive non-cyclicals and Offensive Growth. Obviously, the downgrade of Technology to neutral should be considered as well. I continue to be relatively interested in secular growth areas rather than cyclical growth names.
For relative investors, my work still sees attractiveness in classic Defensive non-cyclicals and some Offensive Growth. I continue to be interested in the highfliers of the last cycle as some of them are now down over 60-80% and are heading towards negative extremes, which are likely setting up compelling entry points for investors with a multi-year investment horizon.