If we re lucky, we get a year-end rally. But maybe not. The momentum that carried us off the lows of the crisis -- thanks to the various stimulus packages -- is running out of steam and its hard to see how current conditions keep stocks afloat:
- Summer weakness. - End of QE2... Bill Gross thinks that QE3 will consist of fed language rather than bond purchases... hot air where bond purchases used to be. - Fiscal contraction... The republican conspiracy to tank the economy in the short run (to gain the presidency in 2012) by rolling back spending is likely to have it intended consequences: slower growth, more joblessness, a recovering economy gasping for air. - Likely double dip in housing leaves the consumer depressed. Lack of construction puts pressure on construction material producers. - Commodity markets are unlikley to re-flate immediately. Maybe ferts will do ok, gotta eat. Maybe oil stays firm, gotta drive. Meanwhile, coal ,copper, steel and iron have probably peaked for this cycle. Gold and silver are still in bubble-land... really no way to know where they are headed since pricing is irrational. Besides, systemic inflation is a non-starter with unemployment above 9% - The global picture remains hostage to the performance of EMs. That is where the growth is... but they are all raising interest rates signaling a cyclical top... or at least a desire to limit the pressure created by accelerated growth. Maybe BRIC stocks can make a move in the absence of other investment opportunities.
Healthcare has been beaten up... maybe opportunity there. I read recently that people are delaying surgical procedures, leading to wind-falls for heath insurers.
Enterprise tech may have peaked for this cycle. Consumer tech is in for volatility -- analysts still do not get that US domestic PC sales are not the meat of the market any more... or at least not the driver of growth in techland. Interesting opportunities remain in specialty semiconductors, cloud computing, move to mobile, pad-appliances, etc. But tough to swim against the tide.
We have all been expecting a summer sale....mabye it is happening now. What if we get an upper level consolidation all summer? Could happen. 3rd year pres term says it will still be strong. Ultimately, I have to look at valuations and where they lie. I still think AIXG is looking cheap. Possibly nibble over the summer. I like IPGP but it is a bit pricey now.