What I’m Telling Investors Right Now in San Francisco ...

Greetings from San Francisco! I’m here for the MoneyShow, and I have to tell you: I love meeting with investors like you in person. Your questions always keep me on my toes, and our spirited market discussions over coffee or cocktails are a major highlight of these conferences.

If you weren’t able to join me here … and especially if you happen to be reading this from Canada … don’t worry. There’s another chance coming up. I’ll be presenting at the MoneyShow Toronto that runs from September 8-9, 2017. You can register to attend for FREE by clicking here or calling 1-800-970-4355 and mentioning my name.

As for what I’m telling investors right now in the City by the Bay, it boils down to the following major points:

1. Federal Reserve interest rate hikes are supposed to be bad for bonds. They’re supposed to be bad for homebuilders. They’re supposed to be bad for interest-sensitive sectors like REITs and utilities. They’re also supposed to send gold down, the dollar up, and put a lid on the stock market. But the opposite is happening.

2. I see four major reasons for this: First, the QE unwinding process is going to take forever – not just because of what our Fed is doing but because of what central banks overseas are, too. Second, the interest rate cycle has only just begun. It will take much longer for rate increases to start “biting” based on my analysis of several historical rate cycles.

Third, the economy is far from a recessionary “tipping point.” I base that conclusion on both market indicators and economic data. Fourth, investors have only started shifting their allocations to stocks from bonds … and the move comes after a multi-year, off-the-charts love affair with fixed income over equities.

3. Our proprietary indicators signal that the market advance remains healthy. The Weiss Ratings Market Barometer shows that figures on investor sentiment, GDP, unemployment, industrial production, and housing are all trending in the right direction. While we’re seeing a bit of nascent weakness in the ISM indices, and Treasury yield spreads are contracting somewhat, it’s not enough to give bears the upper hand.

As for our BUY/SELL ratios, they look positive from both a short-term and long-term perspective. Especially encouraging is the fact that our Ratings data shows the biggest improvements from a year ago are in sectors like Information Technology, financials, industrials, and consumer discretionary. That’s a bullish signal for growth.

The only real sector that’s weakening is consumer staples. Energy remains in the dog house … though it’s no longer getting worse like it was a couple of years ago.

4. That doesn’t mean we face no threats at all. Traditional mall-based retailers and grocers are getting “Amazon-ed”, with many chain stores reporting lousy sales, big layoffs, store closings and more.

Energy stocks are still performing poorly, even as the underlying fundamentals have stabilized. Investors appear to be worried the supply glut will persist for some time, putting downward pressure on pricing and company financials.

You also know I’ve been warning about “Peak Auto” and an impending bust in that sector since 2015. Sure enough, auto sales are falling, auto inventory is ballooning, used auto prices are tanking, and auto loan delinquencies are surging.

5. Still, none of those challenges individually or as a group appear to be enough to derail the broad averages (even as they’re a great reason to avoid stocks exposed to those trends).

So my focus continues to be on stocks that pay market-beating, yet RELIABLE, dividends — and that deliver solid capital gains to boot. I also like select bond ETFs, particularly those with reasonable credit risk, lower durations, or floating rates, and sectors like defense and travel/leisure.

Following that playbook has worked so far in 2017, and I believe it will work for the rest of the year and beyond! Now, it’s time to get back to my presentations. Then later, I’ll see about scheduling a bike ride across the Golden Gate Bridge – and tracking down some 49ers gear for my stepson.

Until next time,

Mike