We currently have a conservative portfolio strategy because of the Fed’s very hawkish statement last week, low earnings, and a drop in market expectations. Now that bad earnings are in the rear view mirror, we are looking at a very unaccommodating Fed in front of us. There is a lot of information that is all over the board.
Currently here are many mixed messages in the markets. While many companies have been beating their low earnings expectations, the tech companies, which have been holding up the economy, are underperforming. With these contradictions, investors are asking, “What will make portfolios go up?” Our answer in the video.
We had a mixed bag of economic reports come out last week, some good some bad. The jobless claims report was good but the bad was in retail sales and small business sentiment, which hit a new year low. We believe a lot of business owners have fears concerning the upcoming elections. There is an uncertainty and the markets don’t like uncertainty.
Janet Yellen’s dovish statements last week canceled any notion that there would be a live Fed meeting in April where they would discuss raising interest rates. This limits the Fed from making market altering news until their June meeting, making oil and corporate earnings the top drivers of the markets.
Investors felt an impact on their portfolios from a falling dollar as the Fed did not cut rates and lowered their rate hike expectation from four to two this year. That caused the falling dollar which increased oil prices.
As we watch these short bear market rallies occurring our technical indicators are showing us that the top 20% of short selling stocks are providing the most upside in these market rallies. These rallies are not fundamentally driven. It’s people covering their tails.