This prediction came out from Fidelity recently.

https://www.fidelity.com/viewpoints/market-and-economic-insights/five-market-scenarios

I tend to agree with him, and believe in secular stagnation as a long term environment we live in now. So how do stocks behave from here?

So far from the bottom in Q1, US small/mid caps did the best, while blue chips and defensive names not so much. I disagree with the author that a defensive consumer staples dividend portfolio can keep inflating much longer. at PE>22 & Div.=3.4%. My guess it just goes sideways in a 15% range for years to come.

xlp

Secular stagnation has been priced in since 2012, because high growth and defensive names have outperformed cyclicals and leveraged small company stocks massively. While it is possible another 2 years out-performance can happen, historically speaking this is not likely.

Since the July peak, XLP has gone flat, Which gives me some hope we can have a healthier broad-based rally in US stock market.

pmi

US service sector is near stagnating again. So much for the FED. No more rate increases for this year for sure. This will give room for EMFX to rally more. Like I said yesterday.

 

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