The markets have rallied to new highs in the last month, with the rally very broad in nature. Most major indexes have jumped to new highs and we are continuing to see leadership in the Technology and Financial Services sectors. If the economy continues to improve, this rally could continue, albeit with some bumps in the road. There are a couple of thoughts we have regarding this market and the economy:
The markets are currently in rally mode and it’s a welcome change from the crazy volatility we experienced last year. That being said, we would expect volatility to rear its ugly head at some point this year. But, we believe the path of least resistance is still up. So, we will look to use market volatility to our favor.
The markets have continued higher through the first couple months of the year, as global economic data sets continue to impress. At some point, maybe soon, the markets need to take a breather. But, to this point in the year, there has not been a catalyst for a pullback. Intuitively, we thought the Federal Reserve’s recent rise in interest rates would cause investors to pause. However, Fed Chair Jane Yellen’s comments were dovish and this kept investors on the buy side. Unlike many rallies we have seen in the past couple years, this one is being driven by strong economic improvement. A few points:
Unlike we have seen in the past four or five years, this global economy appears to be gaining a lot of traction. There will certainly be potholes along the way. For example, the Federal Reserve will most likely raise rates three times this year. But, we believe any correction in this time frame would be healthy and lead to further upside by year-end.