Saturday, August 19, 2017

TLH Weekly Review 8/19/17

Is it possible the market has awakened from it's seemingly eternal slumber?  That's what just about everyone thinks, and they are already calling for a huge market crash.

I can't say I completely agree the market will crash, but I have been saying and thinking for awhile that the market could really use a pullback. That should help set the market up for it's next uptrend. Small caps had already been struggling more than their larger peers.  That's usually a sign things aren't looking up short term. But like any indicator it's not 100% fool proof.

The S&P 500 had two out of three largest down days so far all year in August.  Is it now beware the Ides of August?  There is a solar eclipse coming on Monday. Eery coincidence.


Still I don't think this bull market is done like everyone else is claiming it should be. Stocks aren't cheap on a historical basis with the S&P 500 trading at a 12 month forward P/E of 17.4 which is above the historical average of 14.0.  That's not a huge premium screaming bubble territory.  Does it mean there's no good values on traditional metrics? For sure. 

All eyes will be on the Fed next week at Jackson Hole. The market has been going all over the place on when the Fed will raise rates next week with most betting 2018 is when we see the next one.  That's possible, but I still don't doubt the Fed will want to stray to far from it's original path. We could see one in December, but I think that would mean we might not see one at all in 2018, or at least til the tail end. 

The portfolio did not have much news. Earnings season is behind us and for the most part it was pretty good. The portfolio has been reeling from it's heavy reliance on tobacco stocks, and the now clear indication the FDA is looking to put the hurt on the industry further.  I think it's a little overblown, but when the government is after stocks in your portfolio you must keep a keen eye on the situation. Altria(MO) has taken it on the chin the most as it's business is entirely focus on the USA.  Even British American Tobacco(BTI) that recently gobbled up former portfolio member Reynolds American has struggled recently as a result.  I'll be looking very closely at the portfolios tobacco allocation for 2018.

Fora moment it looked like our Ishares Nasdaq Biotechnology ETF(IBB) was going to really start breaking out. It hit a high of $329.90 a few weeks ago, but has since floated back down. Don't you just love how the market picks those numbers? It was so close to $330 even. Still the ETF has been a 14% winner this year.  I think the next few years will do quite well. 


That's all for now.  Enjoy a nice weekend and get outdoors!

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