|Bull market naysayers have little room to hide at this point.|
The front-and-center issue for investors on Wednesday, and for the foreseeable future, is how to play this correction-defying chart. Last Tuesday's selloff may now seem like an aberration -- the kind of profit-taking pause that will continue to dot the low volume rally -- but it is harder to have conviction about a significant correction right now, economists and traders say.There are four ways to view the market amid the unabashed, if low-volume, bullishness: preserve capital and trade selectively, chase performance, bet that there's plenty of upside left in price-to-earnings ratios, or just sit the whole thing out, which is what many investors continue to do on the crowded sidelines. "We are not outright betting against the market with the way it's acting, but we're not bullish here," said Kingsview Capital's Phillip Silverman. "I would expect to see these gains given back at some point in the future, but right now there is not much you can do. The market is very low volume but it's cranking." The money manager said that for the buy-and-hold investor, the rally has resulted in P/E multiples that are hard to justify, and it's best to view the current run as a trader's bull market. There is reason to expect the current confidence in the U.S. economy to weaken in the coming quarters too, said Ryan Sweet, Moody's Analytics economist. Sweet said rising gasoline prices actually helped to push retail sales higher in February, but the "oil shock" may still be in the cards as gas prices march up into the summer. This was one reason the Fed was forced to put into its statement the reference to oil and gas prices: It doesn't want to seem tone-deaf on an issue that is front and center for consumers. "The economy is improving, but the warm weather may have juiced the retail data, and gasoline prices become more problematic the more they move above $4," Sweet said. "This pace in retail sales spending is not sustainable, and by midyear, job growth will be back below 200,000. It's a welcome surprise, but we will see softer reports from retail and labor markets," the Moody's economist concluded. Michael Hanson, senior economist at Bank of America Merrill Lynch, said investors reading any incremental optimism into the Fed statement on Tuesday may be mistaking a "mark-to-market" process (that the Fed has to perform) for bullishness.