I’m expecting the markets to sell off in the very short term as earnings season ends this week.  I still see the same 3 main forces driving asset prices though:  huge amount of government stimulus (approx. $3trillion) still not in the system yet) and continued low interest rates along with solid corporate earnings reported.  Because of these, I believe that any near-term sell-off can be another buying opportunity as I think the markets will rally again into the new year.  Next summer is where it seems to me that I’ll change the investment strategy from high growth companies to either defensive or inflationary. 

The reason I say by summer is the very 3 forces mentioned above driving asset prices could all reverse then.  By summer, many policies implemented by the current US administration seem likely to me to impact corporate profits, interest rates could rise beyond the 2% threshold (key to wall street outlook) and government frenzied spending may stop with the mid-term elections. 

As to whether the possible new strategy may be ‘defensive’ or ‘inflationary’ to me is determined by China’s debt issues.  If China can continue whistling past the graveyard of their debt problems, then inflation could really become apparent.  On the other hand, if their debt cracks turn into a debt break, then that could be recessionary to China and thus the global economy, especially Europe (Germany in particular), Australia and Latin America, and thus I’d look to defensive names and away from inflationary ideas.  Kind of like approaching a “T-intersection”: I know I’m going to have to turn; I just don’t know which way yet.  I take comfort knowing that I see many investment opportunities for either change.

I remain Thankful to work for you as your advisor and I wish you and yours a healthy and blessed new year. 

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