It's Not What You Think
Most commentators on Wednesday are making an overly simplified analysis that goes like this:
Stocks soared Wednesday BECAUSE the Fed raised rates.
Yes, on the surface that's what it looks like. However, when you dig deeper it is actually something else at play as we can all appreciate that higher rates are not considered a catalyst for the economy
As shared many times in the past, investors hate uncertainty because it clouds the investment picture which leads to a more cautious approach. Now that we know where the Fed stands the uncertainty is cleared up and investors can more accurately chart their course. That course being to align their portfolios for the continuation of the bull market since the economy continues to expand.
Do not read that to mean we are getting back to a gung ho bull market with double digit gains. That is unlikely as stocks are pretty close to fully valued and earnings growth is low. At this stage of the game, stocks should go up by the following equation:
GDP growth + dividends + inflation
The first two items get you to around +4%. Inflation is the bigger mystery. Let's call it 1%. So all together we are looking at around 5% gains from the stock market in 2016.
That is pretty tepid if you are a typical fund investor. Being a more selective stock picker, with the help of the Zacks Rank and style scores, will greatly improve your odds of handily topping those results. No better time than the present to make that happen.
Just What is a Game Changer Stock?
Best,
