INCLINE VILLAGE, Nev. — The July 14 column detailed my market outlook, which was sideways with an eventual break to the upside. With the market near the top of its range and our consolidating outlook, expect a little weakness. Gloomy European headlines will appear once again. CNBC and other financial shows will predictably parade their list of bearish analysts. Last week one analyst predicted Dow 3000. That same week his ETF was shut down for its poor performance.Pessimists are everywhere and for that matter the few optimists are not really all that upbeat either, yet stocks are doing fine. The Sandamp;P 500 is up more than 10 percent this year with big-cap, dividend-paying (and raising) stocks leading the way. Utilities, our favorite sector at the start of the year, have been among the best groups (second only to telecom) with the XLU reaching a level not seen in more than four years. The rally in utilities is not over even though valuations are unusually high and a little profit-taking from time to time is inevitable. Investors will continue to focus on income and buy utilities.ATandamp;T and Verizon remain strong, the former especially so, and their dividend yields explain some but not all of the strength. Some see ATandamp;T as the largest beneficiary as smart phones and tablets proliferate. I have always assumed that the two companies would control the lion’s share of the wireless voice and data market, at times each having the upper hand. It seems ATandamp;T has the edge now, or at least investors see it that way.Earnings growth is the mother’s milk of a bull market, as we all know. Stocks have doubled since early 2009 and so have earnings. No coincidence that. Second-quarter earnings are running about three percent above year-ago levels. Not much of an increase, but a level consistent with a slow-growing economy.Profit growth has clearly slowed. More important for investors is that in many cases management is tempering its guidance for the rest of the year. Revenue growth has slowed, too, or for some companies disappeared. That is also temporary and will change when U.S. and global growth begins to accelerate. When? No one knows for sure, but it will. It always does. Booming economies inevitably cool down, and weak ones eventually recover. During the former many investors believe the good times will never end; in the latter they see no hope for better days. I said “many investors,” not all. Some have a better sense for cycles and the bigger picture. They’ve been buying.— David Vomund is an Incline Village-based fee-only money manager. Information is found at www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
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