Stay Vigilant

 The last few weeks I have embarked on showing you the three stages to my investment process - the three body problem - in which I look at the Fundamental and Behavioral drivers of the financial markets and what Catalysts may be out there to change investors minds.  In order to remind you of the summary of the data, let's go quickly back through the data. In the Fundamental section we look at the strength of the economy and the liquidity that is still in the financial system. The economic trend continues to be strong. Yes, everyone expects the US economy to cool off this year. It has been running at historically strong levels. This should be expected. We identified a few potential problems areas, with inventories building and with weaknesses overseas, namely in China. Since we discussed this, we have seen companies such as Lululemon and Peloton both discuss the excess inventory and the steps they needed to take going forward. In fact, the forward outlook from many companies reporti

The last of the three bodies in the three body problem is Catalysts.  As we build the view, it is important to know what the trend of the economy, and therefore the trend of the market is. It is important to know what is driving this trend at home and abroad, and how this impacts different parts of the market.  In addition, one must ascertain the behavioral tendencies of the market, to determine where the supply & demand is. Price is the intersection of supply and demand, so discerning what is affecting either of these, is vitally important.  However, in both of these cases, Newton's First Law the law of inertia, will hold. An object in motion will stay in motion unless acted upon by another force. This other force comes from catalysts.  There may be many that an investor should consider, but I have simplified this into three specific catalysts. Since last week's blog was so long, I wanted to give you a break. The three catalysts I will discuss are economic surprises, earni