A vast gulf is appearing between bullish technicals and macro concerns. The bulls, who are mainly technicians, point to strong price momentum, which may be interpreted as discounting a soft landing for the economy. The bears can be found in macro and valuation, as equity markets are complacent about tight monetary policy and slowing growth.
Who's right? Should you believe that price is leading fundamentals, or stay cautious and not fight the Fed?
In the 1993 Berkshire Hathaway shareholder's letter, Warren Buffett famously quoted Ben Graham:
In the short-run, the market is a voting machine - reflecting a voter-registration test that requires only money, not intelligence or emotional stability - but in the long-run, the market is a weighing machine.
Where you stand on the bull and bear question depends on your time horizon. Do you focus on the voting machine or the weighing machine?
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