A lot of people seem to be bearish of stocks. Some think they can go higher. But I think they can still go a lot higher. This was the point that I was making on our Conference Call 3 weeks ago. The information coming in since then continues to confirm all of the things we wanted to see. While I was pounding the table to be buying I also pointed to a group of things we wanted to see happen to make sure we were in the right direction. This included US Bank Stocks rallying with US Interest Rates, and Gold and Bonds falling. We wanted to see Europe break out along with U.K., rather than rolling over creating a big mess out there. Nikkei needed to recover and stay in a bullish range in momentum. Every single one of these things happened. So yes, I absolutely think we can still go a lot higher in stocks.
From an asset allocation standpoint, one chart that has been an important one in my eyes is how US Stocks are doing against competing asset classes, bonds and Gold in particular. If stocks are in the bull market that we keep claiming they’re in, then there should be outperformance over other assets that comes along with new highs in stocks themselves. The consolidation we’ve seen throughout the year so far has questioned that. It’s even convinced some Gold bugs that Gold is in an uptrend. Sentiment towards higher bonds and lower rates also shot up. This to me, is the perfect recipe for continued outperformance out of stocks. It looks like Stocks broke out vs bonds this week and the breakout vs gold is right around the corner: [Read more…]