Spring Letter to Clients {Conclusion}

Today we publish the conclusion to our Spring letter .  Again the bullet points are highlighted.

Business Insider.com cited a recent commentary from Gluskin Sheff’s David Rosenberg who noted, “We go into fundamental bear markets either when the Federal Reserve overtightens, when the economy heads into recession or both.” Our own internal work supports Rosenberg’s assessment. That is why irrespective of what might occur in the next few months; there is nothing in our analysis that leads us to believe that we are on the cusp of a recession or a contraction in corporate earnings that could lead to a longer-term market decline.  The Federal Reserve has signaled that they are in no hurry to raise interest rates and earnings do not signal recessionary concerns.  So far as first quarter earnings have been announced, revenue and profit growth for much of corporate America is exceeding analyst’s expectations.   We are positive about growth as we think the coming months are likely to see accelerated economic activity.  {Click here   if you are interested in a chart set that supports our view that things are getting better with the economy.} We also think investors will soon start to discount a winter that was almost medieval in its grip on the eastern half of the continent. Some of that activity is lost for good.  Restaurants for example can’t make up that Saturday evening when folks stayed home in January.  But the business that needed a new truck in January, the young couple looking for a new home and all the building activity that didn’t happen in the first quarter is still out there. 

We’ve discussed in past letters our longer term positive views.  We see nothing to change this analysis.  We are very excited about the potential for the many favorable things we see happening to the economy in the coming years.  We point these out in our letters and on our blog because they are often ignored or discounted away by the press.  That crowd is for the most part pessimistic, preferring to focus on problems on the political front, economic imbalances and the like.  We do not ignore these things as they all represent legitimate long-term concerns. But the fact that stocks may go to sleep for a bit is irrelevant to our long held thesis that our economy is slowly healing from the Great Recession.  We still believe that favorable demographic trends, coming energy independence here at home, coupled with the powerful gains we are seeing in productivity and knowledge during what we have taken to calling the "Era of Miniaturization" is longer term healthy for stocks.  These factors and others should lead to a resumption of the bull market once we get through any period of consolidation.  Probability would suggest however that the resumption in the advance is likely loaded into the back end of the year.

*Long ETFs related to the S&P 500 in Client and personal accounts although positions can change at any time.