“The man who is a bear on the future of the United States will always go broke.”

– J.P. Morgan

Good Morning,

“In preparation for our descent into XYZ, please make sure your seat backs and tray tables are in their upright and locked position and your seat belt is buckled and tight around your waist.”

Sadly, given the overdone media coverage, I am reminded of that statement from flight attendants whenever we enter an earnings season. And these days, that seems like about every 2.5 weeks, no?

Anyway, I especially think of it when we note that we have rallied into earnings season. Typically, you would like to see the opposite: nervousness, angst, questions and such about earnings – preferably with some selling before the parade begins. Alas, we got the opposite this time around – which, while not designed to scare anyone – could set the stage for some short-term “buy the rumor, sell the news” type chatter and price action.

So – please note: I would not be surprised at all to see some “congestion” here as price action (ideally) could chop a bit internally and carry with it a week or two (or three) of red ink, taking the bulls down even further into low AAII sentiment readings.

Indeed, I would call it darn near perfect if we could get a 22-25% read on Bullish sentiment in one of those weekly updates during earnings season.

If we are fortunate enough to get that, try hard not to stress out – it’s been a solid run since the breakout to new highs in October. As noted though, one cannot get too uptight when it is perfectly normal to test those areas at times for price support.

The Flip Side

Of course, the other side of the coin is that we get substantially supportive reports across a wide swathe of the economy as earnings season unfolds. If CEO’s and CFO’s bump their earnings and project higher growth rates ahead – those hoped for price resets may not unfold at all.

I simply highlight this: As much as it feels good while “nothing but upward price movement” is unfolding, it is the slow and steady increases over time which tend to be far more productive for the long-term investor. In other words, melting up increases the risk of a melt-down as emotional churn can get dicey at times.

Our collective jobs? Keep our wits about us and remain patient while others will surely get emotionally fearful again at some stage.

The Good News?

Massive cash levels remain hidden in defensive plays like bonds, money markets and bank accounts – all setting records for inflows for 2019. Shocker right? Record highs in stocks and we start the very next calendar year with 67% of the crowd not bullish (AAII) and mountains of cash sitting idle.

The overall data remain supportive – even as BAML reports in their year-end piece as well:

Net net – I continue to suggest investors (in general) remain outright scared of the stock market. In a punishing tilt and a cruel play on emotions, this is likely to continue as prices rise higher. The “altitude sickness” discussion we have shared before continues to be real.

I hate to say this – but that has historically been great news.

Monster Banished

For most of 2019, the “Tariff War” was all the media could focus you on. Yes, there were a few interruptions – but for the most part, China was the focus. The entire time, we covered for you that China was the latest in a long string of monsters which would be forgotten – just as soon as the next monster arrived.

Alas, here we are: new highs, record earnings, record jobs – and the end of the China “Trade War” – along with a parting gift from Apple – record sales:

Expect new, larger and more dangerous monsters soon. The focus remains on the long-term horizon. Remember – it is the current and not the waves which long-term investors benefit from in their financial plans.

One more thing -pray for a correction.

Closing it Out…

The Barbell Economy™powering the US ahead, is driven by the two record-setting generations of our time. While it will always have periods of struggle and angst, we are all blessed to be living in these unique times.

And this game is just beginning. Based on US demographics, the 2020’s and 2030’s are set to make the 1980’s and 1990’s (birthplace of the Baby Boomers Growth Phase) look like the JV team at work.

So, there is only one question left to think about…two actually:

√ Feeling Pessimistic or Optimistic?

√ Just standing on the sidelines or ready to get in the game?