Birinyi does not see an overheated market or a top. ”I don’t see an area that could really flame upwards and I don’t see that much hot money,” he said.
“Over the course of this market, 75 percent of my strategy has been the fact that the negative case has not been valid,” he said. He said the market does not have a ‘melt-up’ makeup yet, and investors are able to put money in gradually
“I think from that view point, it’s not running away from you. Every day you have a chance to get a little bit invested,” he said. “To me it’s very seductive, and the person who is underinvested has a chance to get back in.”
Birinyi said the tax bill is not a factor for him, since its impact is unclear, as are the final details.
“This is a market with limited visibility. We’re not going to guess where we’re going to be in December 2018. Our latest target is 2,700 in mid-first quarter 2018,” he said.
But James Paulsen, chief investment strategist at Leuthold Group, said the market does have a different feel now.
“This is the first time in this recovery where the news is too good,” said Paulsen. “It feels like the first time people are worried about missing out as opposed to being worried about being in.”
The Dow surged 331 points, or 1.4 percent, to 24,272 Thursday, while the S&P 500 jumped 0.8 percent to 2,647. The S&P was up 2.8 percent for the month.
“I think it’s time to peel a little a away a bit, not necessarily leave the market but start to move more conservatively,” Paulsen said. “This is more of an end game than the beginning of a new leg.” But that doesn’t mean the rally is ready to stop. “It could blow through 2,700.”
“On the tax thing ,this just feels like you buy the rumor and sell the news,” he said.
Paulsen said the market could be getting ready to trade sideways to lower without a big sell off. He said one thing that could start concerning investors are Treasury yields if they continue to rise. The 10-year yield was above 2.4 percent Thursday.
“We were supposed to grow at 2 percent. We’re growing at 3 percent. Nobody thought the world economy was synchronized a year ago, and it is. Earnings are good. We’re going to have a tax cut. We got deregulation. It just feels like the news is good and everybody knows it’s good,” said Paulsen.
On the schedule for markets Friday are monthly vehicle sales; manufacturing PMI at 9:45 a.m. ET, and ISM manufacturing and construction spending, both at 10 a.m.