Ok I must confess I don’t have a tie in for “Derek” other than being a great fan of Eric Clapton, so I’m thinking of Dominoes today with the effect of GDP to Corporate Earnings to Stock Valuations. So much for the Gloom and Deflation from this past Summer.
The U.S. economy is clearly accelerating regardless of the weakness in Europe so the recent rise in equity prices is justified IMO. In fact, I do believe that 1200 on the SPX will be surpassed and will become the next support level by this December. While I’m gratified for having nailed the recent market stop with our sales in ETF’s, that top may prove to be a momentary top along the road higher.
RMHI model portfolios have actually exceeded the peak from a month ago and are on their way to an above average year. Since the model is about being “above average” I’m not surprised just gratified. Taking a look at the fund performance list on www.socialfunds.com the top of the heap appears to be the Calvert Capital Accumulation fund which was up approximately 15% at the end of October. Our portfolios have moved almost in sync for the past 3 months and I hope this will rank RMHI as close to the top of the heap as 2007.
Otherwise:
This morning Goldman Sachs raised estimates for real U.S. GDP:
2011 GDP goes from 2.0% to 2.7% and 2012 goes to an estimate of 3.6%.
With that kind of growth, where’s the love for bonds now? If investors want to recoup losses from past years they must adjust for the resurgence of growth in the U.S. and dispense with the “fear trade” of bonds over equities. Bond investors, especially those owning Treasuries will find that there is a very high price for the concept of “safety” and that the perception of safety is a myth to begin with when you find that your pursuit is enjoined with the masses. Safety can most often be found with high investor negativity when the urge to sell is at its peak, no when its the overwhelming trend.
On the Green Investment / Socially Responsible Investment ledger our models are identifying a class of equities that appear to have our favored combination of Value plus Momentum: In particular are Battery Manufacturers and China based waste to energy plays.
Be careful out there
Brad
No Positions