By Steve Reitmeister
I got an email last week basically saying…
“Reity, you lost your way”.
Meaning that I am a downright fool for not getting more bearish when obviously the market is TELLING YOU that its time to run for the hills. And yes, I appreciate that many of those who believe in price action saw the break below the 200 day moving average as a call to “watch out below”.
But I believe that price action is HORRIBLY distorted by algos and HFTs. And thus there is very little truth in price action. Instead fundamentals much more accurately point the way forward.
Gladly I clung to the True North of the fundamentals allowing us to find ourselves now closer to the all time highs than the recent bottom. And soon the recent lows will become a distant memory…then forgotten altogether.
We will discuss what’s next in the rest of this week’s commentary below.
Market Commentary
Yes, fundamentals are the True North of investing. Gladly they continue to point to the market retaking the previous highs of 4,818 and beyond in the year ahead.
5,000 this year is a near certainty in my book. And my year end target of 5,500 is still very much in play.
Because even with Omicron, and inflation and supply chain issues and, and, and…we find that the economy continues to rebound in healthy fashion. That was on full display this morning with a 57.6 reading for ISM Manufacturing. New Orders points higher at 57.9. And best of all is a new high for the manufacturing employment indicator now up to 54.5.
Earnings season is another place that this economic health is showing up. Yes, high flying names like Apple and Alphabet have shown impressive gains for the tech names.
More importantly, across all companies we see the vast majority beating with estimates rolling higher for the future. The latter part is the most important as it says there is no reason to suspect an economic slowdown any time soon.
And if that is true…then there is little reason to continue on with the charade of this recent sell off. So just as the price action guys were jumping ship, this created capitulation that showered rewards on the fundamental investors who understood what was really going on.
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