The quiet, beautiful coast of South Carolina is at its best during the autumn months.  But thousands of miles offshore, warm waters of the Atlantic Ocean and winds created by the rotation of the earth join forces to create tropical cyclones, with the potential to advance into full blown hurricanes heading for shore.  So are there unforeseen forces converging to threaten the current bull market in U.S. equities?  We think not.

During the month of July, the Leading Economic Index¹ rose 0.9%, continuing its longstanding upward march.  The LEI is designed to signal the strength of the economy 6-12 months in the future.  The U.S. Treasury yield curve remains “normal,” with short-term rates lower than long-term rates, indicating that the economy is healthy.  The market has shrugged off geopolitical turmoil in Russia and the Middle East, staving off any meaningful correction for over two years.  Underlying corporate earnings remain healthy, supporting current historical valuation levels of the equity markets.

We believe that regardless of market conditions, investors should focus on building well-diversified portfolios of high-quality stocks.  We focus on companies with low-debt and solid earnings growth, and work to optimize performance and minimize volatility by extending holding periods.  Systematic investing is critical for success, whether or not there is trouble stirring in the distance.

Source: The Conference Board.

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