Investors are Feeling Very Good Heading Into 2020
As we head into 2020 the confidence among investors is sky high and for good reason. The S&P 500 gained over 28% in 2019.
As it turns out, one year ago was a terrific time to buy stocks as there was a real feeling of blood in the streets with investor confidence at an extreme low. Today. Not so much. Buying stocks feels easy and safe.
Just because stocks are running hot doesn't mean it can't continue, but with such confidence it would be wise to expect a correction in the near term. Even the slightest correction (3% to 5%) will probably feel a lot worse after such a strong fourth quarter.
However, when it comes to sentiment indicators, like the one shown above, they are much better at signalling bottoms in stocks than tops. Just ask the bears over the last decade.
A Historic Bull Market But Not The Longest. Yet.
Good news. The current bull market that started in 2009 still needs to run for another 550 days to break the previous record from 1987 - 2000.
Among the major sectors technology stocks (XLK) where the big winners this year with energy stocks (XLE) pulling up the rear. Financials (XLF) and communication (XLC) stocks did well with healthcare (XLV) performing very well the last two months nearly catching up to materials (XLB).
I don't pay much attention to predictions or forecasts but I think at some point valuations will come into play and money could start to find it's way into sectors that have been lagging for the last few years.
I know I'll be watching the oil and gas sector very closely as it could be a beneficiary of sector rotation and could have a chance to play some catch up after lagging significantly over the last decade.
I don't know what 2020 will bring but it's safe to say the trend is your friend right now and fighting the tape or trying to time a top has been futile.
There's always a bull market somewhere and opportunities within select individual names can make the difference from an average year to a great year. I will be doing my best to spot these winners in the new year.
I wish you all a healthy, happy and prosperous 2020. Thanks for reading.
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