S&P Hits Record Highs – Aren’t Post-Brexit Profits Nice?
Just two and a half weeks after the Brexit panic, the market has turned 180 degrees and is now lapping up stocks like it never even happened.
The market is very emotional and trades on a whim, giving us plenty of opportunities to compound our portfolio by selling peaks and buying dips.
So what’s the strategy from here?
The Forward P/E is rising and nearing levels where it spent most of 2015 trading at. More importantly, the Forward P/E as a % of Trailing P/E appears to be rising again for the first time since the December 2015 interest rate increase.
These two attributes may lead us to believe that the market has potential to increase a bit further over the short-term, which may very well be true.
However we must consider the reason the market began declining is because of the December interest rate increase – this hasn’t changed. And since the Fed is expected to continue increasing rates (something the market has recently forgotten), any rate increases will push down stock prices in the future.
For this reason I’ve sold most of the bullish positions taken during the Brexit panic at a significant profit. The more the market rises without a break, the more bearish my portfolio becomes in the short-term.
I’m expecting the market to take a dip sometime soon – most likely this week. Depending on the significance of this dip, I’ll sell bearish positions for profit and re-take bullish positions. And until the market remembers about the future rate hikes, the more significant of a dip it’ll take for me to allocate the same portion of my portfolio to bullish positions.
Aren’t post-Brexit profits nice?