Francois Trahan: Today vs One Year Ago
Trahane presented a variation of Doug Cliggott's discussion ("Then and Now"). Cliggot looked at the differences between today and 20 years ago. Trahane compared the current market to March 2003:
1) Technically, the market was very oversold 1 year ago. Today, its no longer oversold and is actually overbought;I do not see anything in this list to disagree with. Its always intriguing when different methodologies and time frames arrive at similar conclusions.
2) Valuation was compelling a year ago. There are far fewer compelling stock valuations today;
3) Equity Cycles were at a post-bubble low, with an expectation that the market was primed to go vertical. It did, and we should now expect (at best) a sideways market for some time (Note: This is consistent with the work we've done on post bubble environments -- see 3 Bubbles);
4) Economic data was at cycle lows 1 year ago. Today, the ISM just hit a 20 year high -- and then rolled over. From a contrarian perspective, you want to buy when the market when its hated, not loved;
5) Lastly, Trahane looks for a rotation form smaller caps to larger ones, from high Beta to more stable stocks, and from speculative issues, to quality, profitable, dividend paying firms (sound familiar?)
My expectations are for a few more weeks (or even months) of consolidation, and then another leg up into the fall -- and that may well be it for this cycle. We'll obviously have a better read as more data becomes available.
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Is Francois Trahan the same guy who was forced to leave RBC, Ned Davis Research, and Brown Brothers Harriman ... guess he really fooled Bear Stearns. He is living proof that the world truly is backwards.
Posted by: Kevin Wagner | Oct 1, 2004 11:01:05 AM
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