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Have The Bears Finally Won?

Clif Droke profile picture
Clif Droke


  • Short-term weakness aside, the longer-term picture remains bright.
  • Corporate cash flow and balance sheets remain strong.
  • The short-term correction won't threaten the long-term bull market.

The stock market remained internally week despite a mild technical rally on Tuesday. While the bears retain control over the market's immediate-term trend, there is a question as to whether they will obtain control of the major trend which is been up since 2016. In today's commentary we'll look at signs which point to the bulls ultimately maintaining their control over the long-term uptrend.

Asset manager Laszlo Birinyi once famously stated his Cyrano Principle. Briefly stated, his principle says that "Whenever the market faces a problem which is as obvious as the nose on your face, policymakers will have a remarkably easy time finding the solution." As near as I can recall, he made this statement during the 2008 credit crisis which proved remarkably prescient.

The dynamics of the credit crisis required a far more aggressive response from corporate entities and central bankers alike. This time around, however, the immediate problem facing the stock market is also obvious to everyone but the required response will be far less intensive in nature.

What's more, monetary and economic conditions are far more benign now then they were during the last bear market. This will make it for easier for the informed market players to touch the bleeding before it gets out of hand. In other words, investors should not expect the commencement of a new bear market.

As Dr. Ed Yardeni pointed out in his latest blog posting, corporate America remains fundamentally with the upcoming earnings season expected to contain more positive results due to the effect of tax cuts. Yardeni also pointed out that forward revenues are at record highs for eight of the 11 S&P 500 sectors. Moreover, S&P buybacks totaled $548 billion last year while dividends rose to another record high of $436 billion as of Q4 2017. As Yardeni points out, both measures are good

This article was written by

Clif Droke profile picture
Clif Droke is an equity research analyst and writer for Cabot Wealth Network. He has covered equities and commodities, specializing in gold, since 1997 and is the editor of the Cabot SX Gold & Metals Advisor.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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