Recently, market volatility has picked up amidst a lot of headline noise. Here at Pinnacle, we don’t get distracted by every noisy data point — we’re trying to keep your portfolio aligned with the market cycle.
But this does offer a good opportunity to update you on our market views, and how we’re allocating your portfolio.
One of the most important things we do at Pinnacle is monitor the global business cycle. Right now, it’s sending divergent, mixed signals. In the U.S., we have a positive economic profile, which is good for corporate earnings. But that also means the U.S. Federal Reserve could take its foot off the accelerator.
Globally, it’s a different story. There are decelerating growth rates in Japan, Europe, and China, and that’s forcing their monetary authorities to try to reverse the trend.
Market valuation continues to be skewed to the negative side. In fact, our models are hitting levels not seen since 2007. Technical conditions are still mixed, but are starting to decelerate. The primary trend is still up, and that’s a good thing. Unfortunately, we’re starting to see cracks developing within this bull market.
On the other hand, some of the more bullish evidence we’re seeing comes from our quantitative methods, and our proprietary models are in mildly bullish territory. Additionally, the independent analysts we follow are also mildly bullish. While they never fully agree, on balance, their message is to give the bull market the benefit of the doubt.
In conclusion, the evidence remains mixed and our portfolios are aligned in accordance with that evidence. However, we won’t be dogmatic: If the evidence changes, we’ll change with it.