Should We Be Worried About Valuations?

The same can be said to a certain degree with the 1996 signal as the S&P nearly doubled in the ensuing 3.75 years. And a similar situation occurred after the signal seen in February 2015 when the S&P was around 2050. Same thing happened again on a repeat signal that isn't shown that occurred on 1/31/2018, as the index has risen over 40% since.

So, if you believe that valuations are extreme due to the market becoming overheated and detached from earnings reality, then, yes, it makes sense to take some chips off the table. Or at the very least, take your foot off the gas in your portfolio by lowering the beta of your holdings.

But, if you believe that the economy is going to return to normal in the next 6 - 9 months, then it is probably okay to, "Party on, Wayne.

My take is that my crystal ball is in the shop (again!) and I simply don't know what will happen next. As such, I'm splitting the baby here by reducing exposure in my aggressive portfolios and taking the beta down a smidge in others. At least until the macro outlook becomes a little clearer, anyway.

Now let's turn to the state of my favorite big-picture market models...

The Big-Picture Market Models

There are no changes to report on the Primary Cycle board this week. And with the five out of six models currently in healthy state, I believe it is best to continue to give the bulls the benefit of the doubt.

* Source: Ned Davis Research (NDR) as of the date of publication. Historical returns are hypothetical average annual performances calculated by NDR.

Fundamental Factor Models

There are no changes to the Fundamental board this week. However, as I pointed out last week, it is important to recognize that there are no buy signals on the board at this time. So, from my seat, the takeaway is that risk is elevated. For me, this means that this is not the time to have the pedal to the metal.

(Click on image to enlarge)

* Source: Ned Davis Research (NDR) as of the date of publication. Historical returns are hypothetical average annual performances calculated by NDR.

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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 ...

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