Markets Stay Irrational Longer Than You Can Stay Solvent
If you have a strong feeling the market is ahead of where it should be, we think it is correct. There is an old traders expression: “The market can stay irrational longer than you can stay solvent, so do not bet against a market trend.”
Indeed, this stock market is being artificially inflated by the Federal Reserve and other historically large government stimulus, pushing us further up than any of us are comfortable with at this point. The good news for investors is that the Federal Reserve has articulated that they will keep all of the stimulus in place through at least 2022. While the fiscal stimulus passed by Congress is set to runout over the next few months, they have publicly discussed extending the stimulus. Given it is an election year there is a high likelihood that they will do everything in their power to prop up this economy before voters pull their levers in November.
As mentioned last week, the market internals (breadth, volume, sentiment) all continue to look strong.