Morning Tack: "The Santa Rally"

As humans we’ve learned to rely on pattern recognition to survive. When our great, great ancestors heard a loud commotion coming from the trees, the smart ones assumed it was a predator, like they had experienced before, and high tailed it out of there. The slower ones, who didn’t spot the pattern, often became lunch (and, ergo, not ancestors!)

This same pattern recognition tendency is niggling at many investors when it comes to current stock market outlook: The thought goes “With values this high, and a 9-year market run, surely the bottom is going to fall out soon like it has in the past right?”

It is true that in some stock market sectors, valuations are high. Additionally, this has been a very protracted “up” market for quite some time.

However, as the article from Jeff Saut, Raymond James Chief Investment Strategist, points out, high valuations, in and of themselves, do not portend the end of the “up” market cycle. You’ll see that Jeff’s outlook is for a positive 2017 year end, and higher stock markets during 2018. We share this same outlook.

Of course, an “outlook” is an expected scenario, but many factors move the stock markets and surprises can occur. With that mind, we continue to believe that you should retain the diversified stock/bond/alternative investments balance that we’ve discussed and implemented on your behalf. Please let us know any questions.

Joe Downes