Q1 GDP was -4.8%. Estimates for Q2 GDP range from -10% to -40%, with most in the range of -20% - -30%. The Fed has the Funds rate at .2% and longer term rates have moved up .1% across the yield curve, so they are steady at historically low levels. Factset states blended earnings (90% actually reported, 10% estimated) on the S&P for Q1 will be -14% vs. prior year. Their estimate for Q2 S&P 500 earnings is -42%. That's real bad. The trailing 12 month GAAP PE on the S&P with the most recent quarter being Q1 (90% reported) rose to 24.4, up from 23.2.
My long term S&P chart is mildly encouraging as the price action has risen and is back in the rising channel it has been in for a decade.
So, the economic data (GDP) and valuation metric (12 month trailing GAAP PE) are negative indicators and they are at odds with positive price action and the support of the Fed.
What is a body to do?
I think it is a bear market. The market is supposed to trade on earnings, and earnings look poor. At some point, valuation matters, it just looks to me we are not at the point where valuation matters yet.
I hold some large cap, low PE, good dividend payers, my largest holding is JPM that I am in at 92. I pick up a little extra selling covered calls at 110 or 115, 30 days out.
I buy and hold in my taxable account, and trade in my IRA.
I trade some semi's, like TSM, hang a low ball buy out there, then hold for a rally and sell into the rally. Same with INTC, QCOM. If I have to hold them for a while, they pay a dividend.
For me it is a bear market, although the long term chart throws that opinion into question. We're in a recession, the earnings are bad, and the earnings are going to get worse when the next reporting cycle kicks in in July.