Strategy and Tactics

A) A stock market P/E of 19 to 20 means a 10 to 15pct appreciation from current levels. We would welcome it before “a nasty correction”!

B) We stayed the course strategically. We heard about recession(s), yield curve various inversions, destructive trade wars, impeachment,. Brexit… you name it!

C) Tactically we like the 15  to 16 pct return for the year with relatively low risk.

Playing some defense here.

D) Again, not trying to be clever market timers. Respecting market wisdom as timers lost big, again!

E) Our point continues to be that the P/E of stocks looks elevated at 17. But 10 yr bonds have P/E about 45 for the US and …infinite for Europe.

Moreover, on the one hand, the E of stocks is growing (about 7 pct through the years).

On the other hand, Coupons are stable, not growing, and a rise in nominal interest rates to provide positive real rates will affect negatively bond prices.

Of course, Luck is better than brains. But we need to stick to our strategic long term strategy with some short term tactical adjustments.