Skip to comments.Cautiously Looking Beyond the Fed
Posted on 02/22/2014 8:20:43 AM PST by Kaslin
There wasn't a lot of volume, but the market shrugged off an early indecision and rallied higher. The bias is to the upside, and despite a shaky start to the year, the long-term trend remains intact, which is very encouraging. Also encouraging is that the market is moving higher, even as the dollar edged higher as conventional wisdom shifts towards the belief; that it's going to take a universally acknowledged disaster or hiccup in the economy, for the Fed to divert from its unofficial goal of monthly tapering.
The market moving higher on less Fed accommodation has been the story since December 18, 2013. Since then, stocks have stumbled on bad news and rallied on good news, or in the case of the last couple of weeks, rallied on economic data given the benefit of the doubt based on the harsh winter weather. The light volume simply underscores that lingering doubt among pros, and others that oversimplifies investing and the human experience.
Stocks are still a forward looking mechanism that reflects accomplishments, dreams, goals, and life in general. Nobody in the world will get up tomorrow and go to a mall or bazaar, and make a decision to buy or not to buy based on central banking policy.
The market is expensive no matter how you look at it. It doesn’t mean that a crash is imminent, but simply that the next few years will result in a much lower rate of return than the past few years due to reversion to the mean, just like the last few years were making up for the last stock market crash.
On the other hand precious metals miners have gotten butchered the last 2 years way more than the last stock market crash. I expect at least the next couple of years to be a bonanza for them, way bigger than any single year’s return of the stock market from the last few years. Reversion to the mean.
The real fun will come, when rates go up soon. Not far to go with those, before the world starts fleeing from the dollar.