Sunday, October 15, 2017

Can the equity market stay the course

The equity market's equanimity is beginning to seem a bit far fetched.  Sure, overall earnings growth for firms broadly is forecast to continue but at modestly diminished levels and while the market p/e is relatively high, it is not in the kind of completely unreasonable territory that proceeds a dramatic correction.  On November 10th, 2016 there was a post here entitled "Equity market is a measure capitalism but not of civility", and that seems to remain the case.  Trump's ending of health care subsidies for the poor and his ongoing actions through the tax proposal to bolster the wealth of 10% of the 1% do not seem to affect the markets.  The thought here is that Trump trauma eventually will be seen as negative.  Consumers will be impacted over time so the economy will as well.

While credit has become more accessible, it is not yet our of control.  Residential real estate credit exposure is stretched in areas that are the most prosperous.  Commercial real estate in global urban centers may be in danger of some retrenchment, aka losses in the medium term, but it's not yet underway.  Credit card debt keeps rising while auto loans are at nose bleed levels, but auto is not a market that is so large as to sink any major financial company.  If any of these areas begin to see some sharp deterioration, the market would come under pressure.

The thought here is that at some point before the Christmas season there will be a correction in the market, at least enough to scare away some traders that have become complacent, or are having too much fun.  Overall equity exposure is still being selectively reduced here, but new names are added from time to time.  Patience with new names is short, and have been backed out of if the rationale for buying is at all in question.

That's it from here, in the game but waiting for a hiccup.


Post a Comment

<< Home