Insider-Alerts.com

• January 2017 - Now two months into the Trump Rally, we believe it is time for extreme caution on behalf of investors. Over the past year we have become more and more uneasy about the US economy, it's "perceived" strength, and the path which the Fed and a new administration will be heading. The fact that US market indexes have made new all-time highs and continue to maintain these levels is also extremely unnerving. We do not believe there is any justification for it. 

• In our last update to this page two years ago, we made the case for being overweight community banks. With the enormous rise in the entire banking sector since the presidential election, our thesis has played out. We now believe all banking/financial positions should be trimmed or exited to lock in the recent gains of 25% to 50% or more seen since the election. There is much baked in to the current price of banking/financial shares and a euphoria coming over the sector in the belief that the environment will be significantly better under the new administration. That may well be the case. However, any benefit to the banks will take years before it is seen in their earnings. In the mean time, with valuations now stretched, we believe that the earnings picture is going to underwhelm investors relative to the expectations they now have. PE ratios are extreme and nothing has changed as far as the earnings outlook for 2017.  

• Our near-term outlook indicates it is now a time for caution. Investors should not be beating their chests with regard to recent performance or taking risks in the belief that the environment is accommodating towards continued market advances as we've recently seen. 

• With the recent spike in interest rates, we believe investors should be taking advantage of the situation. Take profits from equities and scale in to interest rate sensitive vehicles which have fallen in price and seen yield rise. 5-year CDs now pay 2.3%, and 10-year are offering 3% - these are rates which have not been seen in a few years. We have also seen a very nice rise in rates on municipal bonds. Whether this is a temporary spike in rates or the beginning of a longer-term trend higher is yet to be seen. However, the opportunity is here to begin acquiring strong income producing assets, with minimal risk, while locking in good yield. Traditional fixed income investors who have gravitated to equities in the chase for yield over the past couple years should look at this as a gift, being able to sell their equities at a profit near all-time highs in the market and move back to a more appropriate fixed income biased allocation. We believe the US equity markets have been irrational thus far - managing to completely ignore the interest rate picture and continue higher. We do not believe the equity markets can continue to be as irrational as they have been. As earnings continue to indicate that equities are overpriced, we see extreme downside risk, with limited upside potential. Again, investors should exercise extreme caution in the current environment.