• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Foreign Stimulus Could Push U.S. Stocks To New Highs

Stocks Impacted By Comments Overseas

Chinese and German officials indicating economic assistance coming

Even with the Fed trying to cut back on their stimulative efforts, U.S. investors are still being impacted by talk of new programs in China and Europe. From CNBC:

In a speech reported by state media on Friday, China's premier indicated the Beijing government was prepared to take action to bolster the world's second biggest economy, saying the government would gradually roll out targeted measures to help economic activity. And on Wednesday, Germany's Bundesbank said the ECB could buy loans and other assets from banks to support the euro-zone economy, with the statement marking a dramatic departure from its previous stance on the policy.


Debt: A Recurring Theme

Consumer Debt Levels increasing

Europe is still trying to stimulate their way out of a debt crisis. China is worried about loans made against frothy real estate. Back home in the U.S.A. we have similar concerns. From Yahoo Finance:

As of March 2014, American consumers owe $11.52 trillion in debt, an increase of 1.6% from last year. The average household owes $7,115 on their credit cards and the average indebted household owes $15,252. Americans owe $8.05 trillion in mortgages (the average mortgage debt being $152,209) and $1.08 trillion in student loan debt. When combined with corporate debts the U.S. collectively owes about $28 trillion in private debt.


Investment Implications - Let The Game Come To You

We have been talking about S&P 500 levels 1,844 and 1,848 longer than any investor or trader would care to admit. For the record, those levels have been relevant for three months. Based on our master market model reading during Friday's trading session, stock bulls continue to maintain a slight edge over stock bears. The tweet below sums up the current state of affairs:

Ciovacco Tweet

Do it yourself investors and traders tend to be "hands on, I am going to make something happen" people, which can lead to overtrading. A blurb from the Point Of The Game reminds us of the value of patience during periods of indecisiveness in the financial markets:

How many coaches have counseled anxious and pressing players, "let the game come to you." It's hard advice, even odd advice in a world of sports and professions where aggression and taking control are the preferred strategies. "Getting there first" or "controlling the tempo fly" in the face of this disciplined approach. Yet this sage advice matters profoundly for successful athletic and professional endeavor. Let the game come to you, however, takes strong virtue and character to learn the skills and insight needed to achieve it.

This week the S&P 500 closed at 1,857 (above 1,844). At a minimum, stock bears need to take out 1,844 before they can reach even modest corrective milestones. Before the bulls can make any significant progress, they need to take out the recent high of 1,878. Therefore, between 1,844 and 1,878, we prefer to remain as patient as possible within the context of our rules-based asset allocation system. The rules have been trying to "let the market come to us" as they did not call for an across the board adjustment between March 18 and March 27.

Our asset allocation system has master allocation rules and rules tied to each ETF held in the portfolio. On Friday, the rules called for an incremental reduction on the growth side of the portfolio. We continue to maintain a respecting-the-market's-vulnerability level of cash, along with stakes in U.S. stocks (SPY) and technology stocks (QQQ). We will enter next week with a flexible and open mind.


Weekends - A Time To Improve

Covey's quadrant

As we covered in detail on March 27, weekends are often the best time to plug holes or refine your approach to the markets, which is a quadrant 2 activity. It is difficult to visit Stephen Covey's quadrant two when the financial markets are open. Reading can often spark creative ideas. The articles below cover investment and risk-management topics that apply to all economic environments:

  1. 1994, Rising Interest Rates, And Your Approach To The Markets
  2. 5 Reasons Your Simple Bear Market Plans Could Backfire
  3. How To Monitor Increasing Risk Of A Stock Market Correction
  4. The 2 Most Important Questions For Investors

 

Back to homepage

Leave a comment

Leave a comment