Obvious

On the first of the month I read Marketwatch Trading page, this may be the only time in the month I go to that site unless something pops up on my RSS feeds.

Michael Farr has a good article about his outlook for the market. He urges caution and lists a bunch of reasons that many people have touched on before. It is an obvious trade that the US market has to roll over and go down, right? I concede plenty of people are bullish.

I can't look at the landscape and create a bullish scenario. That does not mean the market can't go up, in fact it has been going up. It may keep going up. My sentiment is unlikely to change but neither is my exposure to domestic stocks likely to change either. Having the wrong opinion, which is what I have right now, does not matter. I have written countless times about my exit strategy so I won't bore you with that again. Suffice it to say the stock market is not exhibiting any signs of problems with demand for equities. This is in the face of some big negatives.

For most of the year and certainly this quarter my domestic stock picking has been fine, not great not horrible, but while I have been wrong about the US market so far, I have been right with all of the foreign exposure I have been writing about and the weaker dollar trend.

From here, the combo that will hurt client portfolios the most would be a strong dollar and weak energy prices.

I don't know how many times I have written about not outguessing big turns in the market and the last few months illustrate the point. If I had become measurably defensive at the start of the year, consistent with my forecast for 2006, client accounts would have lost out on a very good four months.