Will 2016 Parallel 2012?

                                             Will 2016 Parallel 2012?

US markets seem stalled past week after robust splinter from February low. Although markets officially enter the seasonal volatile season with unknown variables lurching out sooner or later, it seems that a blowout headwind markets face still is miles away for the time being if there is one.

So how and what uncertainties markets need to digest so that it can breakout to new high ground while ignoring all negative news?

·         Unlike 2012, this year markets still stay below proceeding high. i.e., technically, markets may be still a correction market rally.

·         2012 was Euro zone big flounder in addition to US presidential election drama; 2016 also has an uncertainty of Euro zone—Britain exit of European union, called Brexit (June 23), plus Deja Vu presidential election.  

·         Also markets seem to well understand the impact of Brexit and US presidential elections and will gradually discount these uncertainties.

·         The 13% market run from February low has discounted most of previous overreaction to interest rate hikes and fundamentals. Markets know that fundamentals are neither so bad, nor so good, keeping Ms. Janet Yellen still for a while.

 

Next week starts Q1 earnings report season. Solid earnings may offset seasonal market weakness, paving the way for later year market rally. Therefore, investors need to wait for solid ER, or conservatively buy 5-8% dip during volatile May—October season.

 

Gunning Ju

4/9/2016 from NYC