Our advice to investors is to “ride the bull” but not to chase it.  We believe the bull market in global stocks reflects the recovery in global economic and earnings growth, which we think will continue in 2017.  Our strategic allocation process recently reaffirmed our strategic preference for stocks over bonds, and this is currently reflected across our asset allocation portfolios. 

That said, we do not see this as a time to take above-normal risk by chasing the current bull market.  Our strategic process reminds us that US stocks are above trend, and with sentiment so optimistic, we think the pace of returns is likely to moderate.  As you can see from the chart above, the 200-day moving average is rising (a good thing, in our view), but the index is now at the top of its rising band, with the 200-day moving average at the bottom of the band.  Our balanced portfolios are close to their strategic targets and have sufficient cash and bonds to take advantage of a pullback should it occur.

David Fuller's view

This strategy makes sense to me.

After March, stock markets enter two quarters of below average performance.  Even if they defy their long-term odds, the chances of a 10% plus correction on Wall Street in 2Q and 3Q, given uncertainty and volatile Trump’s negative influence which has yet to be reflected by indices.  Corrections in most other stock markets would be larger than what we see in the US. 

I would regard these setbacks as a buying opportunity, which I will finance with accumulated dividends in my personal long-term investment portfolios.   

Here is a PDF of The Weekly View.