U.S. stocks continue to move higher despite an overwhelmingly bearish attitude. Investors sentiment, considered a contrarian market indicator, has not recovered from the brief but steep corrections experienced in late 2015 and early 2016. Don’t be surprised if the bearish attitude reverses bringing more buyers back into stocks. It doesn’t have to happen but it could and if it does stocks could stage a strong rally.
In terms of the strength of the current rally, it gets a little better each day. One of the market gauges I used with my Adaptive Growth strategies is firmly in bullish territory and the spread between bullish and bearish positioning continues to improve. The action of some individual stocks has also been encouraging.
Another indicator I reference for the Adaptive Growth strategy remains in a sell mode which is why I consider the market to still be in a transition. Because we remain in a transition I am prepared to make defensive moves in the Adaptive Growth strategies quickly if conditions start to deteriorate.
I think many investors are unprepared for the possibility the market could stage a strong rally the balance of 2016. One thing that I have learned over the years as a professional investor is the market has a tendency to do the opposite of what many market pundit’s broadcast.
That is one of the beauties of using a combination of my Adaptive Growth strategies and Market Growth strategies. In a highly leveraged economy like we have today investors can expect deep contractions as imbalances correct. This is where an Adaptive Growth strategy designed to avoid sustained declines like those of 2008 can be very helpful. On the other hand, having part of your investment dollars exposed to longer-term growth and dividend investments along with the right bond investments for some level of protection help participate in the recovery regardless of how uncomfortable investing might feel at that time.
There is no perfect investment strategy for all markets. My approach is to keep it simple. I use a simple timing approach, straight forward investments and combine an Adaptive Growth and Market Growth approach which should position investors for a wide variety of market outcomes.