I have written about this stuff many times so hopefully there will be some consistancy. As I write this I am sure I will leave a couple of things out but here is a list of the obstacles I see.
- The Fed is raising rates aggessively. We will either have longer rates going higher (a negative more often than not) or an inverted yield curve.
- The Fed sees inflation coming. Clearly CPI has been missing a couple of things. I am not certain bad inflation is coming but I don't know more than the Fed.
- Curtailing inflation this time around has a high likelihood of slowing down the economy.
- The hurricanes will also take a bite out of GDP.
- Gas at $2.60-$3.00 could hurt consumption as could much higher home heating bills. Anyone aware of that ugly statistic about most recessions starting in the face of rising energy prices?
- This cyclical bull market is 2 1/2 or three years old (depending on when you start counting) which is about a long as they go.
- Earnings are expected to grow slower in 2006.
- Just what exactly, if anything, is gold telling us? Gold zigs when stocks zag. If this latest move we are in the middle of for gold sticks, I might take that as a leading indicator for stocks.
- LEI has been down so many times in the last year and a half, I have to wonder when that might again matter.
Knowing this is how it works means there is nothing to get worked up about. The capital markets will warn of problems and I hope you heed things like the 200 DMA, inverted curve, the market going down slowly over a period of three months or some other things that you can learn about from other sites.
I have written many times about where I expect to shift to within the portfolio as well; more foreign, more yield, more fixed income, more cash, more commodities and perhaps one or two other things to be determined later.
I am not making much headway on any of these trades now because the market is not saying it is the right thing to do yet. To repeat none of this may happen or be the right thing to do. Part of this has to be gut feeling as well. I still have no interest in trying to out guess a major change in the US market because there is a high likelihood of being wrong.