Our last writing was on March 6th, titled Life’s Lessons. The reason is, there is not too much to do in the short term. We intimated that pundits have become too bullish and that gave us pause. The markets sold off and then moved back up which means we need a catalyst to move markets higher or lower. As of this writing, FactSet says the S&P price return is up 117 bps or about 1.17 percent since March 6. Also, according to FactSet, the S&P is trading 18.3 times 2017 and 16.4 times 2018 earnings.
Why is this important?
We believe the markets are slightly expensive given the current valuations. The combination of expected growth, higher interest rates and high valuations dictate that we should be patient. We caution on making new allocations to the equity markets at this junction. We do not believe a bear market sell off is imminent, but some bad news can certainly cause a retracement. Considering all of these factors, we think it is prudent for investments to be added at a better market valuation.