A few facts to start with:
- The market (as represented by the S&P 500) is rather expensive.
- Since 1950, 14 out of 15 bear markets bottoms have been retested within the following months. The one exception was 1982 when the ratio between advancing stocks and declining stocks was abnormally high. So far this year, we have not experienced the same phenomenon. Then again, the market has a way to fool the majority of people.
- Optimism and confidence seem back in force.
Conclusion: Even though we remain optimistic for the medium term and that we do not hold important cash positions, we nevertheless are very prudent in selecting the stocks in our portfolios. Most of the large caps, technology and telecom stocks are not at bargain levels. As mentioned in our last quarterly letter, there are 2 markets … and we our concentrating on the inexpensive one, which enables us to obtain very good results.
A last comment on most of the technology stocks:
You maybe have heard the expression: “if you drop a dead cat from high enough, it will still bounce” …