Skip to main content

Predictions and Reality

Let's get right to outlook prediction back in September 2017 has proven to be totally wrong! My abundance of caution around that DOW 22,000 level was overrun in a stampede not seen in quite a while, reaching all the way to 26,000 with nary a pause. Simply incredible. And yes, I missed it. Do I feel foolish? How could I not. My only consolation was that the stocks I typically use as my proxies, like steel and GE, didn't enjoy the ride. So, I missed it and I didn't. I definitely exited some tech names like AAPL, CSCO, and TSLA too early though.

Am I changing gears yet? Nope. The sheer ferocity of the advance reminded me too much of the dot-com bubble. Remember that one? Easy money in anything with a website. Until the bottom fell out. I'm not making the argument the dynamic is the same, just that as a trader, the markets felt scary to me in the same way. The cryptocurrency market is definitely the same dynamic though. At any rate, I'm still optimistic but also looking for what feels like the right pullback. As a trader, I'm fully prepared to turn my view around on a dime, but so far, I still see the landscape generally the same. I need a few more dominoes to fall before I'm comfortable making bets.

The current decline of today and this week helps to reinforce my patience. Despite the robust job report, the sands are shifting as economic fears about increasing rates and inflation take hold. I've believed all along that the Fed has been behind the curve so it'll be interesting to watch that component play out.

I'm also still skeptical of the lasting power of the recently passed tax reform. Besides the one-time bonuses many will receive, I don't perceive other touted benefits to trickle down. My view continues to be that upward wage pressure will be muted by companies shedding older (higher paid) workers while they are rewarded for investing in technologies that will exacerbate displacement of the work-force. Record low unemployment rate, you say? I'll explore that illusion in an upcoming post. I've had a front-row seat the last year to that reality.

Despite my cautious stance, I'm not fighting the tape either. I'm just staying on the sideline until it looks clearer to me. With declining correlations, there's likely to be a resurgence of sorts of an active investing style. In other words, it's time to get smarter.