With the bottoms of August and September behind us—and fear rekindled among numerous investors—is it possible that the market will continue to motor higher from here, possibly all the way to year-end? Yes, it is possible. But more likely—in part because it’s getting late in the year—is that any advance will be led by some fairly narrow groups of stocks, possibly featuring two distinct categories of stocks.
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There are still a few flies in the ointment; the longer-term trend remains down and most of the big movers have been the worst performers of the past few months.
Clearly market momentum is bullish in the short term, but there could be a great deal of supply/sellers waiting to take profits or exit positions that they didn’t liquidate before the August selloff.
My view of small caps right now is still moderately positive. I’m not pounding the table to buy everything out there, but pick your spots and your stocks carefully and you should do just fine.
Select blue-chip stocks are selling at the lowest levels in many years, with low P/Es and high yields. At the current prices, you should not pass them up.
In effect, GDP growth is the most valuable commodity in the world right now, and most countries are working to make it happen. And the preferred method for growing GDP is stimulating consumption.
Concerns about the Chinese economy convinced the Fed to put off its rate hike once again, sending markets into a tailspin, and they are now retesting their August lows.