Over the past few weeks as stocks declined I remained firm in my forecast that Santa Claus would pay the markets a visit as he typically does in bull markets. One by one, I heard from people why this year was different, why stocks are already in a bear market, why oil would consume the market. I targeted this week and early next for the low as history suggests and for the rally to begin. Yesterday was also a very strong trend based on the Fed meeting for stocks to rally. Given Wednesday’s very impressive showing, stocks should have seen the bottom.

How will I know if I am wrong? That’s the question I always want to answer before committing client capital which I did this week. In the short-term, stocks should not fall back over the coming few sessions below yesterday’s low. Stocks are supposed to follow through to the upside almost immediately, which I believe they will.

Tax loss selling should have ended and the energy stocks are the best group to confirm this. They look like they are beginning a good bounce into the New Year. Was it THE bottom or just a trading low? It’s too early to tell, but I favor the latter right now.

As I mentioned before, more than 80% of portfolio managers are trailing their benchmarks this year which is why I did not believe the market could experience a large decline into year-end. Managers would use any pullback to commit cash and try and play the catch up game. The recent pullback gave them plenty of opportunities although I doubt they went all in, at least  not yet. Continuation of yesterday’s rally will likely force their hands at higher prices and further fuel the market higher.

We’ll see what today and tomorrow brings for stocks, but stocks are off to a good start thanks to Janet Yellen and the Fed.

Paul Schatz

Paul Schatz is President and Chief Investment Officer of Heritage Capital, LLC, in Woodbridge, CT. and a Managing Partner at Numetrix Capital, an investment research firm focused on multi-manager, multi-strategy portfolio solutions.

Editor’s Note: Be sure to check out Paul’s Blog: Invest For Tomorrow


The opinions and forecasts expressed herein are those of Mr. Paul Schatz and may not actually come to pass. Mr. Schatz’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

Heritage Capital a state-registered investment adviser. Heritage also serves as a sub-advisor to other investment advisory firms. Neither Heritage or CONCERT is registered as a broker-dealer.

Employees and affiliates of Heritage may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or Heritage has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.