Monetary Rating Drops to M2

Our rating on monetary conditions has dropped to an M2 rating, on a scale from M1 (bullish) to M6 (bearish).  Should you be nervous?  Not really.  Looking solely from the perspective of our monetary ratings, the bias is toward a bull market for ratings between M1 and M3.  Bottom line...expect a bull market, but one with returns that are a little less than they were the last two years.

Recent inflation in commodities and producer prices are negatives for our composite, as are the recent climbs in interest rates, which have climbed across the board from municipal bonds, to Treasuries, to corporate bonds.  However, the remainder, and great majority, of the indicators in our monetary basket are in good to great condition.

We believe that you can expect some consolidation and/or a small correction, something we've said has been occurring under the surface as far back as last October and November for a lot of stocks, but has recently begun to surface in the major indices.  However, if history is a good indication, just the tiniest bit of medicine is all that it will take for measured sentiment to repair itself quickly, and the bull market will resume.

The bull market isn't over yet.

To view today's complete Market Comment, click here.

Mark Dodson, CFA

Please see important disclosures at the bottom of this page.