Fundamentals Remain Supportive
David Moenning | Aug 07, 2020 11:26AM ET
There are no changes to report on the Fundamental Factors board this week. As I've been saying lately, we are in a fast-moving environment and most of these indicators are rather slow-moving by design. Thus, I am continuing to take the readings from the economic and earnings composites with a rather large grain of salt. However, it is worth noting that the indicators/models that comprise the economic composite have been perking up lately with the more sensitive indicators now on buy signals.
* Source: Ned Davis Research (NDR) as of the date of publication. Historical returns are hypothetical average annual performances calculated by NDR. Past performances do not guarantee future results or profitability.
Looking at the rest of the board, it is important to keep in mind that monetary conditions (interest rates and Fed policy) remain exceptionally favorable, and there is no inflation to worry about. As I wrote last time, these two conditions alone are enough to create a positive backdrop for stocks.
On the negative side of the ledger, we can't lose sight of the fact that stock market valuations are high, in some cases, exceptionally high. However, before you run out and sell everything, we should remember that this is a fairly normal occurrence in post-recession environments.
All in, I continue to believe the fundamental backdrop favors the bulls and that dips should be bought.
Thought For The Day: There is a great difference between knowing and understanding: you can know a lot about something and not really understand it.
– Charles Kettering
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