"V" gets a Vote of Confidence!

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“Buy the Dip” appears to be alive and well! After the abysmal October leading into the horrid December, things have recovered quite nicely! From the recent plateau on December 3, 2018, the S&P 500 (per the ETF, SPY) is only 0.77% off that level per the above chart. Not a pure “V”, but pretty close!

Though the mainstream media does a good job pitching its dire Koolaid to drive ratings and eyeballs, the doomsayers have not been too accurate thus far. On these pages, I have commented on weaknesses in the predictive ability of a yield curve inversion to forecast a recession, identified underlying strength through the important PMI (Purchasing Mangers Index) levels, talked about positive technical factors such as seasonal rebalancing into equities after the large Q4 and December drawdowns to get back to equity targets, and highlighted some well-thought out (and positively-leaning) forecasts from Northern Trust Asset Management and my prior firm, Sun Life Financial.

It is a very rare situation, indeed, where it would be prudent to rebalance away from a strategic allocation to “risk” assets. The situation through December indicated a reasonable case to be cautious, but not fearful, while waiting for some key economic statistics to show their hand. Happily, hanging onto your hat and weathering the storm appears to have paid off this time - for now.