Same Price as a Year Ago

The SPX has chopped its way towards the same price level as it was on December 12, 2017.  So here are the differences between a year ago and now:

1) Fed funds rate was at 1.00-1.25%.  Now it is 2.00-2.25%. 
2) 10 year yield was at 2.40%.  Now it is 2.89%. 
3) Investors were looking forward to Trump tax cuts and double digit earnings growth.  Now we are looking at peak earnings and poor earnings guidance from tech. 
4) Shanghai Composite was at 3300.  Now it is at 2600.  Eurostoxx 50 was at 3600.  Now it is at 3055. 
5) Investors were bullish. Now they are bearish.
6) Global growth was entering its peak.  Now it is clear that global growth is going down. 
7) There was still central bank balance sheet expansion (BOJ, ECB, Fed) in December 2017.  Now there is central bank balance sheet contraction. 

If you just look at the above changes from 1 year ago, would you expect the SPX to be at the same price?  No, you would expect the SPX to be lower.  There is a delay in investor reaction towards fundamental changes.  That is why there are long term trends.  Because investors take time to react to changed fundamentals. 

The most common argument I hear from the bulls is that economic growth is still strong and that there are no signs that we are going into recession.  Also, the next most common argument is that everyone is bearish and that usually means stocks go up in the intermediate term.  As I mentioned in my last blog post, that is looking in the rear view mirror.  This is not the same market as the one we've had for the last 40 years.  Valuations are clearly in the upper range of the last 40 years, and that in of itself makes the market more vulnerable to any signs of slowing earnings growth. 

We have another strong gap up today.  I expect the market to hold the gap up today, as usually 2 straight gap and crap days are not common, and it seems like the bulls are quite eager to try to catch the bottom and the Santa Claus rally.  I am waiting and watching for better opportunities.  I don't see anything great at the moment.