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December Update

December Update

The stock market rallied on tax legislation enthusiasm.  My outlook, however, remains mixed as strong earnings growth, low interest rates, and the corporate tax cut are balanced by elevated valuations, Fed tightening, and unsustainably docile market behavior. Present conditions have largely been in place for an extended time, perhaps triggering reasonable expectations of continued momentum.  It would not be prudent, however, to invest on that basis with certainty because markets are inherently unpredictable.  Most likely rising interest rates will at some point reach an unknowable tipping point that will combine with high valuations to trigger a reversal, the timing of which is uncertain. 

In reviewing my year in stock selection, I am pleased that my fund was particularly adept at avoiding trouble.  We stayed away from the telecommunications and energy sectors entirely.  In technology, we benefitted greatly from owning Apple, Intel, and Cisco while avoiding IBM.  In healthcare, we profited nicely in Johnson & Johnson and Pfizer as opposed to Merck.  In industrials, we enjoyed healthy gains in Boeing and United Technologies while steering clear of the disaster that was General Electric.  Finally, we experienced a very strong return in Walmart, one of the few shining stars in an otherwise bleak retail landscape.

~~Michael Berlin can be contacted at and at (631) 629-4928 .

The information included in this article is not intended to be used as a basis for making investment decisions nor should it be constructed as a recommendation to buy or sell any specific security. Consult your investment professional for additional information and guidance.



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