I was on CNBC this morning, bright and early at 6:10 AM ET. It was a fun segment though, as early in the morning things are usually more relaxed and my segment was eight minutes long. So in other words, I had a lot of time to talk.
Here is a summary of what was discussed:
- Are you worried about this being the long awaited correction due to the Fed slowing its asset purchases? I’m more concerned with the Russell 2000 (RUT) up at the 1,000 area. It took the Dow 16 years to get over this area and the S&P 400 MidCap Index (MID) 20 months to clear this area till just recently. So there’s a chance this 1,000 area on the RUT could cause some trouble. Then look at June. I don’t buy the whole “sell in May” thing. The time to sell is June, as it hands down has been the worst month the past 5 and ten years.
- So how much could we drop if we drop? Could we see a large sell-off or just something like 5%? The thing to remember is this year is looking at lot like 1954 and 1995 in terms of gains and strength so far. In ’95 the biggest pullback we saw all year was just 3% and that was in December. The biggest pullback in ’54 was about 4%. So sure we could see a 4-6% pullback here, but history says it won’t be much more than that.
- Do you have any takes on bonds? When you talk about the bond market the thing to remember is it is a very crowded trade. We’ve all seen the record inflows to bonds the past few years and the outflows from stocks. To me, you want to avoid crowded trades and bonds are very crowded. We still view equities as under loved and for this reason they should continue to outperform bonds here.
- What can happen to the market from here? Up around 1,800 is possible. There have just been 7 times the Dow was up each of the first five months. The average return the rest of the year was close to 10% and it was higher all seven times. That would be up around 1,800, therefore, continued strength is likely.