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State of the Market

| August 15, 2023

Let’s jump right in to where the market is today. Our model is still fully bullish.

US equities sit in the number one spot, while international equities sit comfortably in the number two spot.

Meanwhile our money flow data, another way of looking at market health, is very positive.

And against all common sense, the markets have discounted the Leading Economic Indicators. Usually, the LEI would tell us the economy is heading for expansion or contraction. In this case the LEIs have been saying a recession is coming.

But with the LEI <-5% and the S&P 500 >+5%, it has typically said the markets will show nice gains over the next 1-3 years. Take a look at this from our friends at SentimenTrader.

And here are the numbers to go along with the red dots above.

A very high percentage of time the markets are higher 9 months, 1 year, 2 years and 3 years out.  Does that mean it will happen like that this time? We don’t really know, but the odds are in our favor.

But don’t forget, it’s never a straight climb up. The markets tend to shake the loose hands out from time to time (which I believe we are doing now with the weakness we’ve seen these past couple of weeks). Let’s look at the AAII survey.

You can see that there are too many bulls right now. Remember a few months ago when these surveys were very bearish? Like we always say, if everyone is doing one thing, it’s best to do the opposite (don’t follow the herd off the cliff). Now, it doesn’t mean the market has to go down 20%, a little pullback and maybe some sideways action will get some of these weaker hands back into money market where they belong. That will allow the stronger hands, those with longer time horizons, to benefit from market appreciation. We shall see.

For now, we are fully invested (at levels reflective of your risk tolerance) and will likely stay that way until things change. That could be a month, could be several years. We will reassess on a monthly basis, like always.

On a side note. It’s sad to see the dismantling of the PAC 12, driven by TV revenue. I know I’m old and nostalgic, but something doesn’t seem right about this. Should we really have college athletics? I mean, isn’t it just really about the money now? Colleges jump from one conference to the other for extra TV revenue. Athletes are now able to monetize themselves and move schools seemingly without bounds.  Don’t get me wrong, I’m all for it. Whatever they can make, they should be able to make…but does the taxpayer have to support them getting free tuition, when they are making millions of dollars in NIL (Name, Image and Likeness)? Here’s a chart of the amount of money student athletes are making in aggregate from NIL.

Almost $4 billion by 2025? That’s a lot of likes and followers on Social Media!

Here are the top 5.

Three of these are high school students/incoming freshmen. Two have the advantage of a family name! One didn’t even make the top 5, but has 9.3 million followers on social media. That being-

And she can no longer attend in-person classes due to security concerns!

Well, God Bless them for eking out a living while going to college. How about if we just skip college and allow them to go straight to the pro ranks. Is it really much different anyhow? Thanks for indulging me as I wax nostalgic and hope the Apple Cup remains a thing, even if it takes on lesser practical significance in the years to come.

I hope you have a great week and please let us know if you have any questions…