Why I’m anxious about stocks

By Covestor

I find myself quite nervous about the stock market lately for a few reasons.

First, the S&P 500 Index can’t seem to make any progress.

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We have been essentially flat for the last 5 months.

Flat-lining

While some stocks such as Disney (DIS), Starbucks (SBUX) and Nike (NKE) continue to make new highs, other important leading stocks seem stuck in the mud.

They included Google (GOOG), Priceline (PCLN) and Facebook (FB).

Earnings

Second, earnings growth is anemic.

Priceline reported weak net income growth of 3%. Google wasn’t much better at 5%.  Facebook’s EPS was up only 20% after 7 straight quarters of monster growth.

Economic Cycle

Third, we are late in this economic cycle.  While I expect the US Federal Reserve to be gentle, it is likely in my opinion that they will raise interest rates at least once sometime this year.

It may not be until September but the monetary tailwind that has powered stocks will be diminishing somewhat.

Reducing Exposure

For all these reasons I find myself tempted to cut our exposure to the market somewhat in the days and weeks ahead without doing anything drastically bearish.

Technically, this market is still strong and should be given the benefit of the doubt.

But more and more I find myself feeling anxious moving forward.

The investments discussed are held in client accounts as of May 20, 2015. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

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The post Why I’m anxious about stocks appeared first on Smarter InvestingCovestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures.

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