The economy is really not that bad, especially if you take out energy. China is still growing just not as fast as it has in recent years. The precipitous drop in the market over the last two weeks is not a reflection of what is happening in the underlying economy. It is a reflection that valuations were too high for the growth rate. The markets are adjusting, but we still do not think a recession is coming in the near future. We believe that US large cap dividend managers and international managers are a good place to be for the long term. As for fixed income, we do not think the fed will raise 3-4 times in 2016 based on recent ISM numbers. We think absolute return hedge fund of funds are a good place for more conservative investors.
From a technical perspective, the S&P 500 needs to hold 1867. If it breaks that, then 1820 would be the next resistance. These are guides and not absolutes. At 1867, the market trades at 15 times 2016 earnings and at 1820, at 14.5 times 2016. Based on 2017 earnings and at 1867 S&P 500 number, markets are trading 13.33 times earnings.
We are not calling a bottom in the market because we can never quantify investor anxiety, but when there is blood in the water, it does present a better entry point.
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