Market Strategy: Â HOLD DOW – Buy EU stocks where drivers are intact.Â Expect 2017 to be more volatile in a election year. Buy setbacks.
Market technicals: DJIAÂ Range bound: betweenÂ 20500 and 2100.Â Â Earnings yields are still attractive very low bond yields. The EU central bank are still keeping and very loose monetary policy with low inflation. However in the US we can see the end of this cycle by the FED having done their first rate hike.
Fundamentals: Medium valuation,Â Value stocks earnings and dividends are still relative attractive to bonds. However US Â stocks are not cheap any more. Increasing rate yields canÂ be problematic for stock.
Regions: Europe favored. US Stocks expensive due to lower risk premium. Europe and China is from a valuation cheaper, but with higher risk. Â . Favorite sectors Industrials, Finance and IT.
Bonds: Europe High yield favored.
PreferredÂ Sectors: Industrial, IT. Sectors performance.
Main Threats: Higher US yields. Hard landing in China. Political change by “populist” parties implementing protectionism.
Risk level: Medium.
DOW 1 year, 5 year, VIX (volatility index) and US 10 year T-Bonds
US 10 Year rates
Earnings yields SP500:
EURO Zone dept crises:860-250-1638
Fundamental Market themes:
- + Low short term interest rates means bonds or cash does not offer much if any return.
- + We have slow growth in the western world, but the growth in the developing countries are still higher with a rising middle class globally.
- ++Â 423-744-2398Â is still in a good shape.
- + Â Even though market are up significantly we have not experienced “euphoria” yet in the market.
- + ECB fighting deflation QE style.
- – US rate hikes.
- – Missing European reforms notably in France, Italy and Spain is giving unstable political governments from rising unemployment and deflation.
- — Political instability with “Populism parties” getting in power and promoting protectionism.
- – Strong market performance and low VIX volatility.
- – China slowdown happening and possible hard landing due to housing and debt bubble.