The Market Is Speaking About the Bull /Bear Debate

I had a good number of comments to the Market is Speaking and Bull/Bear Debate posts from yesterday.

Long time readers know that I have been skeptical about the equity market. I have kept clients invested (cash levels average about 10% or so) but have been ready to get defensive for quite a while now.

I don't think it is ideal to necessarily try to outsmart the market here but having a negative opinion is fine if that's what you feel.

The things that worry me are the way the Fed is managing the rate hikes (they usually go too far), earnings growth slowing down a lot, the yield curve forecasting a slow down, LEI being down an absurd number of times in the last year, the impact of oil, the thought that China may actually revalue the yuan and the "Pandora's box" that opens (John Hussman gets credit for Pandora) and a few other things I can't come up with at 6 am.

Weigh that against the positives of good GDP (forecast to slow down though), low inflation (except for gas, which many readers told me my thoughts from earlier this week were wrong, healthcare and food) and low interest rates (this is less beneficial with a flat or inverted curve).

This just does not feel like a bottom to me. That being said whenever a bottom does arrive most people won't know (including me), there will be a lot doubters, fundamentals will not have turned up yet and maybe there will be some sort of extraordinary corporate failure or scandal.

Also the market can rally at any time for no reason at all (this is a repeated sentiment).

So I am in there but I can reduce exposure at any time. I'm not big on extreme bets. There was an IM on a Making Money Now segment this week who said he was 40% cash. Yikes. I wouldn't want to bet that I could keep up with up a little in the stock market with only 60% invested.

One comment said this would be a good time for bottoms up. I am biased. I don't think that way but I could be wrong. I mentioned the other day not much has changed now that it is July. Last quarter it was easier to be a sector picker (energy and utilities) than a stock picker. The two top stocks I had last quarter would not have been the ones I would have picked to be the top performers. I find it easier to get the sectors and countries right.