As we noted in our year-end client letter, we entered 2016 once again generally cautious–even pessimistic–about the stock market and more positive toward the bond market. The main reasons were historically high stock valuations, slowing global economic (and profit) growth, and more systemic global debt than existed before the financial crisis of 2008.
After the worst start to a year in U.S. stock market history, our overall views on the stock and bond markets and the global economy haven’t changed. The abrupt drop in stock prices has made our favorite stocks more attractively priced and brought some additional stocks to an attractive level. But while a broad market rebound from such an abrupt decline seems likely in the short term, our longer-term concerns from current stock price levels remain. As a result, we still advocate holding higher cash levels than normal to provide resources to take advantage of what we expect will be even more favorable prices amid historically high volatility in the months to come.Tags: market outlook, stock market volatility