My 2016 market views and prescribed positioning: moderate bullishness! I’m overweighting America but also northwestern Europe, South Korea and India, and I’m underweighting elsewhere, most heavily Japan, Canada and Australia.
I’m overweight health care (primarily drugs) and to lesser degrees tech, consumer discretionary and financials (mainly banks). I’m underweighting staples and to greater degrees telecom, utilities, energy, industrials and materials.
I’ll detail my sub set reasoning over the next few issues, but regardless, I’ve never been an all-or-nothing category gambler–I’m always global and always own some of any major equity group I expect to lag, lest my macro views are backwards, in which case I’d get slaughtered.
I suggest that for you, too, unless you think you’re awfully clever (and likely are pretty arrogant). It’s more important to get equity-like returns in a bull market than to try to beat the market by a mile at the risk of getting wiped out. Overconfidence is a proven market killer.
So are consensus views that expect rising long rates and a more active Fed than will likely evolve. In our globally competitive bond world it’s tough for rates to rise much while the brain–dead European Central Bank spews “Quantitative Diseasing” (which despite mythology is deflationary, since whenever QD is deployed the quantity of money grows almost not at all).
And there is a long, unnoted history of declining Fed activity as presidential elections near ( barring a crisis). Fed folk hate being perceived as political, but they always are. They dislike being seen as pushing for one side specifically because the next Fed head is picked by the next Pr esident (and their choice might lose anyway, causing alienation). Doing nothing is doing something, though rarely seen as such. As November nears they will become ever less action prone. That’s good. The less mucking around the better!
