Stop Fighting Yesterday’s Battle
Investors have a historical tendency to focus, prepare and protect against the causes of the last crises vs. proactively assessing the environment for the most clear and present dangers. As a result, investors sacrifice returns in exchange for protections that are as effective as the French Maginot line, which was designed to protect against trench warfare, not the blitzkrieg.
Instead of focusing on the last crises, we focus on symptoms that are common across most bull and bear markets and use those symptoms to proactively position client portfolios. The resilience and outperformance of economically sensitive assets relative to recession-proof assets, in combination with strong credit markets and strong corporate earnings, is symptomatic of a healthy stock market over the next 6-12 months. Lastly, as we always do, we will wrap things up by taking a temperature reading in the credit markets to ensure that the foundation of the financial systems remains stable. Here is my colleague Robert Raeburn’s weekly outlook and review: