Some fundamentals on the equity markets

David Rosenberg, now chief economist at Gluskin says he is generally cautious on the outlook for the equity markets. He says it's crucial to understand that secular bull and bear markets move in 18-year cycles, and to understand that today, we are really only halfway into the secular bear market. In a secular bear, market rallies are to be rented, not owned. But in a secular bull market, corrections are opportunities to build your long-term positions at better prices, as was the case with the crash of October 1987.

The rally in the US equity market has been so pronounced that it is no longer just pricing in the end of the recession. It is pricing in two years of recovery. At this stage, there is a little too much risk. If the S&P were to correct back to 840 or 850, versus 1,025 recently, I would be much more interested.

Bob Doll, on the other hand, thinks an environment of economic recovery, low inflation and accommodative monetary policy should be a good one for the equity markets. Investors have been moving money out of cash, which is basically returning zero per cent, and into other asset classes. This trend still has a way to go, which should provide a tailwind for the markets as well. Additionally, reasonable valuations, improving corporate profits and discipline around capital expenditures are all positives. Although markets remain unpredictable, and a correction could still occur at any point, we believe the path of least resistance continues to be up.

I continue to share the same view as Doll, for now.

An update of my trades:
Guocoleisure: TP1 hit. Now gunning for TP2. Go, Guoco, go!