As we enter the final act of the year, a quick glance at the chart below tells the story: the preponderance of black ink (positive returns) on the right side says it all. It’s a clear reminder that my post–Liberation Day caution—expecting slower growth and lingering inflation pressures—proved a bit too guarded and risk-averse. In other words, I was wrong – at least for non-taxable accounts. A humbling business indeed.
Barring some completely unpredictable “black swan” event in the weeks ahead, the market backdrop remains supportive. Corporate revenues and earnings continue to grow, capital spending remains solid, and the Fed—despite the fog created by the ongoing government shutdown—appears inclined to keep easing policy. Add in historically favorable seasonality and a “Goldilocks” sentiment (not too bullish, certainly not bearish), and the near-term setup remains constructive.
Is this bull getting old, and are valuations high? Certainly. Extreme valuations always warrant attention. But bull markets don’t die of old age, and valuation alone is rarely fatal. With investor sentiment not yet frothy, there still appears to be life left in this one.
Be well,
Mike
Sources: Addepar, BCA Research, Bloomberg, Ned Davis Research.