The theme we’ve been recommending for our client portfolios for 2014 has been buying closed end bond funds over stocks. So far so good.
We believed the risk/reward for US equities was very unfavorable for the first 9 months of the year and we began to seriously lighten up on our stock holdings in December.
As of Friday, we now read that Goldman Sachs has downgraded US stocks and sees the potential for a 10% pullback in the next three months.
Goldman’s perspective is that the stock market is richly valued “by almost every metric” but there is no mention of the extreme positive sentiment for stocks and that the mid January to mid February period tends be negative for stocks.
We agree with GS that there will be a better entry point for stocks later in the year as the longer term view of stocks remains favorable.
Brad
P.S. In our last blog post we mentioned that we thought we were wrong in our bullish call on US long term Treasuries based on the ADP data. We had sold the TMF and swapped into the bearish TBT. Well, it appears we may be right all along and this morning we took a small loss on the TBT position and went back into the TMF.
Long TMF