There is a lot of worry about the direction of stock markets. The world economy is slowing, and the United States has yet to face up to some serious fiscal challenges after the November elections. However, in the midst of the rubble of important bear markets around the world, the US stock markets are still in an up trend.
Certainly, there is much that can still go wrong in the US, and elsewhere. However, so far and for now, the US stock market is the place to be.
The following daily charts cover the period from late 2005 through July 10, 2012. The gold line is the 200-day moving average, and the red line plots the arbitrary bear market indicator (20% decline from the 1-year trailing high).
US Small Cap (Russell 2000, proxy IWM)
US large Cap (Russell 1000, proxy IWB)
US Mega Cap (S&P 100, proxy OEF)
EuroZone (proxy EZU)
Japan (proxy EWJ)
Shanghai Stock Exchange (best proxy PEK)
Even though the US is the best market, there are selected stocks outside of the US that offer good values.
Our stocks are primarily US stocks, with few non-US stocks that have compelling features.
Because there are still many things that can go wrong, we have a defensive portfolio consisting of very roughly 25% cash, 20% bonds and 55% large-cap, high quality, brand dominant, financially sound, above average yield stocks with a good history of dividend growth.
We may miss part of a sudden strong move up, but place a higher priority right now on capital preservation than on growth - yet we are not willing to hide entirely in cash.
Disclosure: QVM has no positions in any mentioned stocks as of the creation date of this article (July 11, 2012).
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