Recently Federal Reserve Chairman, Jerome Powell, said he sees the economy as being “in a good place”.

So, what’s good about the economy? The Bull Market Powers On!

So what’s bad about the economy?

With the market at an all time high, I see a trend developing here where market valuations are extended and are becoming less supported by market fundamentals. In my opinion, the only reason the market is up this year is because the Fed did a complete one eighty moving from raising rates to lowering rates. There exists currently today a disconnect between market valuations and core market fundamentals that sustain growth. I think we are going to have to face down some key realities of economic truth:

While overall sentiment remains optimistically elevated, I have turned more bearish on the U.S. economy and its stock market over the next six to twelve months. The market will need to adjust to the real fundamentals of the economy. We need to get through Impeachment proceedings and the media frenzy around it, conclude the tariff wars and get through another presidential election cycle to have renewed sustainable growth.

We believe the global economy is entering a low-growth period as trade tensions and heightened political uncertainty continue to act as a drag on global trade, manufacturing activity, and business investment. However, we are long term investors and looking over the long-term horizon we continue to favor large capitalized proven companies that are US domiciled but have global demand. Our US companies have proven over and over again that they are the most innovative and productive in the world. In fact, these technological changes are happening so quickly and across so many industries, we are in the midst of a fourth industrial revolution with the evolution of technology. As volatility occurs over the next year due to heightened risks, we will want to take advantage of these buying opportunities.

Disclosure: The views presented are those of Patrick R. Wallace and should not be construed as investment advice. Covington Investment Advisors, Inc. is a Federally Registered Investment Advisor.  The information contained herein is general in nature and is provided solely for educational and information purposes and does not constitute legal, financial or tax advice.  Opinions and forward-looking statements expressed are subject to change without notice.  Past performance is no guarantee of future results.  Covington Investment Advisors, Inc. uses reasonable efforts to obtain information from sources which it believes to be reliable and does not endorse, approve, certify or control the third-party content referenced.