Why Is The Market Still Rallying? Is There Anything Still Worth Buying?

“You’ve got to fish when the fish are running” so I won’t sell just because this market is long in the tooth or because, sooner or later, there will be a correction. But you can bet our clients and I have trailing stops on most of the big positions we hold! That way, we let the market tell us when it’s time to lighten up.

Until then, I think our nation can expect a serious overhaul of our individual and business tax system, grounds for rejoicing no matter what the market does. I think we can expect the rollback of over-reaching regulations that have stifled consumers, entrepreneurs and businesses, grounds for rejoicing no matter what the market does. And I think we will see the standard of living rise for many Americans whose jobs were destroyed in the pursuit of some greater Stalinist-type 5-Year Plan for some perceived social good, grounds for rejoicing no matter what the market does.

But Is There Anything Left to Buy?

The answer to that question, as always, rests with each individual investor’s time frame and temperament. For me, I believe there is. I am buying US-based small and mid-cap firms via active managers.

Why small and mid-caps? The reason is simple. These are the firms that have not yet grown to the point where a Facebook (Nasdaq:FB) must cozy up to Chinese dictators in a secret agreement to censor material that might upset the dictatorship, or where Apple (Nasdaq:AAPL) and Google (Nasdaq:GOOG) must spend countless man-hours trying to satisfy a bunch of petty bureaucrats in Brussels. Large-cap firms, by and large, have far-flung interests and revenue sources well beyond US borders. Companies with market caps below $10 billion tend to be far more focused on domestic markets.

I think an intelligent mix of small-cap companies (those typically with a market capitalization of less than $2 billion) and mid-cap firms ($2 billion to $10 billion) are in the sweet spot of what I believe will be a rejuvenation of the markets.