The fuel that makes the stock market go up is simple – earnings. Sure, factors like interest and inflation will have an impact – because they impact earnings. Without rising earnings to tempt investors to stay in the market -- get outta the way – because it would take a titanium blockade to stop them from stripping off the dead-weight of their shares in the race to reach the familiar, safe returns of bonds. Therefore, studying the trends of earnings, interest and inflation should be a top priority for any investor. These are the trends that will reveal the stock market’s true status and clearly distinguish between a here-today, gone-tomorrow correction and a full-on, no-holds-barred bear market.
In VectorVest’s ‘Climate’ updates, we share the objective, mathematical assessment of each of these trends and what effect they have on the state of the market. Based on the favorable or unfavorable condition of interest, inflation and earnings the market will be in one of four possible stages of a bull or bear market (please note, these stages do not need to occur in the market in consecutive order).
P.S. Don’t worry, if you’re a died-in-the-wool, long-term investor, the macro state of the market only has a tendency to change once every few years and can even go several years before reversing. Knowledge of a reversal will simply sound the alarm and allow you to implement damage control in your portfolio.
Current Market Status: Our Composite of Investment Climate Indicators (shown below) fell 0.01 point to a level of 0.90. The major mover last week was the 10 Yr. AAABonds, whose trend indicator fell 0.06 points. Our forecast of S&P 500 Earnings rose $0.02 to $4.38. Its trend remained unchanged at a level of 1.11. We currently have a Case 3, Bull market scenario in which earnings and interest rates are rising, while inflation is falling.
VectorVest Investment Climate Indicators:
(Indicators are on a scale of 0.00-2.00. Values Above 1.00 are Favorable)
VectorVest is the only stock analysis and portfolio management system that analyzes, ranks, and graphs over 23,000 stocks for value, safety, and timing. VectorVest gives a buy, sell, or hold recommendation on every stock, every day. And VectorVest uses a market timing system to help you buy low and sell high.