“Typically, high past returns simply imply that an asset has become more expensive and is a poorer, not better, investment.”
– Ray Dalio, Bridgewater Associates
Markets are much higher this morning as a result of yesterday’s French elections. Markets seem to be surprised a lot these days. Valuations will remain high as momentum continues. Recent estimated earnings growth for the first quarter is 9.0%, one of the best in several quarters. The 12-month forward P/E for the S&P is over 17, higher than the 5 and 10 year average. No need to panic. We know markets can remain over valued for long periods of time and are not good tools for timing market corrections (or rallies). Earnings have been good, but it’s early in the season and May is rapidly approaching. Any capital on the sidelines rues the decision as it grows impatient to become part of the market’s upward vector. On the sidelines hoping for an early May sounds like a tough sell to your clients, but at least they didn’t lose money, right? That’s why they’ve hired you. The investment rationale going forward will remain uncertain just as it always is. If you believe the inflationary forces that have been driving recent market returns will continue, buy value. If not, buy growth. If you believe neither or both are possible: buy SCI.
We’re in the middle of a quarterly rebalancing for Salt Creek Investors (SCI). Sortino Investment Analytics (SIA) has performed their analysis and delivered to us a solution set for the coming rebalance. Turnover for the models was within the range we’ve come to expect (6 new funds) with majority of the changes coming in fixed income and midcap. I’ll have more to report about the characteristics of the funds after we perform the rebalance at the end of the month. Thank you for your continued support in SCI.