The State of the Markets
Wednesday, October 23, 2013

Trader staring a screen - NYSE

It’s tough to be a bear these days.

At the beginning of the year, those seeing the glass as at least half-empty were expecting Europe to drag the economies of the world into recession, China’s economic growth to tank, the unrest in the Middle East to become a huge problem, the Fed to make a mistake, earnings to soften, and the politicians in Washington to send the U.S. into a depression. In short, the bears were calling for the sky to fall and for the U.S. stock market to crash and burn.

The only problem with this thesis has been that Europe’s economy is actually recovering, China’s GDP continues to grow at around 7. 5 percent , the situation in Syria blew over quickly, Fed policy continues to be uber-friendly, corporate earnings for the S&P 500 are at record levels, and try as they might, the politicians haven’t managed to blow up the Republic just yet.

Oh and for those keeping score at home, the S&P 500 is up 21.5 percent year-to-date and finished Friday at a fresh all-time high. So, the question to the bears is how is that negative macro view working out so far?

Bears Say Stocks Are Overvalued!

Despite being dead wrong on Europe, China, the U.S. economy, earnings, and the how the market would perform in 2013, the bear camp remains largely undeterred. Instead of admitting defeat, the current battle cry is that stocks are overvalued and as such, will soon succumb to an episode of mean reversion akin to what was seen in 2000-02.

As Exhibit A in the argument, the negative Nancy’s of the world point to the long-term chart of the S&P 500. The argument is that with prices as high as they currently are, the only direction they can head from here is down.

S&P 500 Index – Monthly Since 1980

To be fair, the chart above does appear to be a bit extended….

Read the rest of the report…


David Moenning

Direct: 303-670-9761


David Moenning is the founder and chief investment strategist for, a website dedicated to investor education and portfolio analysis. Mr. Moenning is also President of Heritage Capital Management, a privately owned, investment management firm. Founded in 1989, Heritage is focuses on risk management and an “own the best and ignore the rest” equity selection strategy.

For up to the minute updates on the market’s driving forces, Follow Me on Twitter: @StateDave (Twitter is the new Ticker Tape)

Positions in stocks mentioned: none

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.