Fundamentals Continue To Favor The Bulls

By David Moenning of Heritage Capital Research

Friday, July 17, 2020 11:00 AM EDT

Good Morning. If it's Friday, it's time to review our longer-term market fundamentals models and indicators.

Our Review Process: Once we have identified the state of the big-picture environment (Market Model Mondays), the current trend and the degree of momentum behind the move (Technical Tuesdays), the potential for a countertrend move to develop (Early Warning Wednesdays), and my subjective review of what is behind the current market action (Thesis Thursdays), we close out the week by checking in on the state of the market's fundamental factors.

The State of the Fundamental Backdrop

Each week we review the market's fundamental factors in the areas of interest rates, the economy, inflation, and valuations.

* 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 - NOT INDIVIDUAL INVESTMENT ADVICE.
View Fundamental Indicator Board Online

My Take...

There are no changes to the Fundamental Factors board to report this week. I continue to take the readings from the economic and earnings composite with a rather large grain of salt. First, it is important to recognize that most of the indicators on this board are long-term oriented and as such, slow-moving. As such, the economic indicators couldn't pick up the self-induced recession. And now will be slow to signal the recovery from the re-opening. A similar situation can be seen within our earnings models.

The good news from the board is that monetary conditions (interest rates and Fed policy) remain favorable and there is no inflation in sight. These two conditions alone are enough to create a positive backdrop for stocks.

Finally, the bad news is stock market valuations are high. However, this is a very normal occurrence in post-recession environments.

When taken together, I continue to believe the fundamentals favor the bulls and that dips should be bought.

Thought For The Day:

"If you don't make mistakes, you can't make decisions. You can't dwell on them." --Warren Buffett

Wishing you green screens and all the best for a great day.

Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

The opinions and forecasts ...

Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

Mr. Moenning may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

The analysis provided is based on both technical and fundamental research and is provided "as is" without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

less

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.

Moon Kil Woong • 3 years ago • Contributor's comment

That is very true that fundamentals are bad post recession and that overall fundamentals are ok for stocks in general. Fear mongers are trying to scare away investors. The economy isn't that healthy, but big corporations are eating small company's lunches, especially if they are rolling with online ads which is buoying Google and Facebook.

| Reply •