What Is An Investor To Do?

While I have stepped back from my blogs for most of August, I have still had the opportunity to have some excellent conversations with clients, prospective clients and non-clients who just want to understand financial markets (and what to do about them, if anything). The U.S. Federal Reserve (along with other global central banks) has, or at least is in the process of creating an asset price bubble as money continues to remain cheap and liquidity is sloshing around the global financial system. Could the bubble continue, certainly. As my good friend Dennis Gartman always reminded us in his daily market letter (which he retired from writing at the end of last year, see my final blog of 2019 Expect The Unexpected (Again)): of the Keynesian quote that "markets can remain irrational far longer than you and I can remain solvent". Stock prices (and home prices, for that matter) will continue going higher until they stop doing so. Whether it is the fear of missing out (FOMO) or that there is no alternative (TINA) which is driving the buyer emotions.

5 stocks are driving the S&P 500: 

And that has pushed the S&P 500 to new highs:

and a year to date price jump of 7.68% in the middle of a pandemic induced recession that could well last past 2022. Think 2030 perhaps? Unemployment is going to remain stubbornly high for a long time to come. The repercussions from that alone will be significant. Seems to be that it is not getting stock and house buyers down, however.

Just in case you were wondering how expensive stocks are:

So if you are feeling the pressure to jump into the feeding frenzy, my advice to you is to be patient. From the Fear and Greed index chart, over time, opportunity will once again present itself as it has in the past (March was a good opportunity), there were a couple of them in 2018 as well. Certainly, the moment is not now. If you have new cash on hand, park it for the time being.

Paul (who manages High Rock's Tactical Model) picked up the Sprott Physical Gold and Silver Trust (CEF) fund in late March / Early April, turned out to be an excellent addition. But this is not a recommendation to go out and make that fund purchase without first checking in with your advice giver on whether it may be appropriate for you. Point being, opportunities will return. Wait for them.

Our good friend David Rosenberg suggested in today's Early Morning With Dave that these are the assumptions that have been priced in to the financial markets (i.e. they are reflected in current pricing):

• That the policy stimulus will continue well into the recovery phase
• That there will be no economic relapse ahead
• That we are months away from a vaccine being developed
• That the erosion in U.S. - China relations is mere noise and more progress is coming on the trade front
• That Trump will end up winning the election on November 3rd.
• That the Fed will finally be successful at generating inflation.

 If you have not received an evite to High Rock Private Client's (belated and postponed) 5 year anniversary (now a) Zoom meeting featuring David Rosenberg as our guest speaker and wish to attend, let us know.