I’ve heard enough. I can help you. I’ve now attended or listened to more than a dozen “second half outlook” presentations from both the sell-side and several asset management shops.
Nobody ever knows what’s going to happen, but its pretty awesome how everyone’s guesses coalesce into a giant miasma of shared expectations. The conventional wisdom about what will happen between now and year-end, along with speculations about how the markets will digest it, is essentially the extrapolation forward of whatever is already happening.
Here’s the current Wall Street consensus – and it is a rock-solid consensus – in a nutshell:
* Overweight US stocks and / or US-focused stocks (companies with high domestic revenues, profits). Tailwinds: Shale Gas Revolution, continuing strength in housing, rebounding consumer sentiment.
* Underweight international equities / EM equities. Headwinds: stronger dollar, China slowing growth.
* Underweight international bonds, REITs, EM debt. Headwinds: less accommodation from US central bank, rates on lower-risk yield plays (like Treasurys) rising.
* Sectors: Overweight Tech, Financials Industrials. Underweight Utilities, Consumer Staples, Basic Materials.
* High oil prices are transitory, “geopolitically driven”, “the wild card”, a possible “headwind for the consumer”.
* September Taper expected, $15 billion taken off current $85 billion monthly asset purchases. Fed reiterates no change in interest rates anytime soon, as a “peace offering” to keep the bond market calm. Stocks falter at first, then rally into year end.
* Larry Summers would be bad for the bond market. Janet Yellen would would be bullish for stock prices.
There you go, just saved you hours and hours and hours of time.
Go read a book under a tree.