Short-Term Cautious, Long-Term Bullish
"We continue to be a little bit cautious over the short term while the S&P 500 trades under 2150-2160... [and] our advice to investors is at least for the next few weeks heading into the September-October window is to remain a bit cautious, expect higher volatility over the short-run but at the same time, get your shopping list together because at the end of the day, we think this is a temporary setback, which is going to give us another buying opportunity, quite frankly, at a better price point in what we believe is an ongoing secular bull market here in the US."
We Just Broke Out of a Two-Year Stealth Bear Market
"The markets have actually been through about a two-year stealth bear market in time beginning in 2014 and they've actually just broken out of this by the end of June, early July, just after that little Brexit crash that we had. So you had almost two years of market consolidation of repricing underneath the surface of higher volatility intended to shake out the weaker hands. So we had the breakout and the breakout gives us a very strong July and early part of August and then the markets became overheated. Also, they're still contending with a massive wall of worry in the sense of economic growth, the geopolitical landscape obviously, our election landscape and an election season coming up, and so I think investor sentiment is utilizing that to take some profits but we don't think that this is going to create a massive new secular downtrend in equity prices at all."
Generational Top in Treasuries
"If you take that view as we do and agree with us and our thesis, then any seasonal weakness we get over the next several weeks should be looked at as a gift to overweight equities vs., in my opinion, the Treasury markets, which we believe are at a generational top, as well as commodities, which we believe are still in structural or secular bear market cycles. So we continue to think that equities are going to be the outperforming asset class for the next few years - that's despite any seasonal weakness. Any further volatility that we get here certainly while the S&P trades under 2150-2160, we are going to use it to slowly scale into equities and continue to overweight that position."
Mainstream Investors Still Absent
"Mainstream investors are still largely absent from this stock's bull market. One of the most compelling charts I look at is the progression of the S&P 500 off its bottom in 2008-2009 at the sort of height of that collapse where the S&P traded as low as 665, we've rallied up to 2200 on that index and every year, as the market has grinded higher we've seen trading volumes move lower and lower. Where we've seen all of Main Street participation has been fixed income, muni bonds, and they're mostly parked on the sidelines relative to the types of trading they did in equities at the height of our last secular bull market and one thing we know is secular bull markets typically end in a frenzy from Main Street - we have not seen that yet relative to the other asset classes out there in my opinion - the equity market is still pretty empty. So I think we have another whole leg to go, whether that's going to entice Main Street off the sidelines even further in the years ahead, that's going to be the catalyst that pushes valuations beyond sort of all reasonableness and which points to any type of secular market top - I don't think we are anywhere near there yet."