Until the recent tech sell-off most broad market measures were near all-time highs. I’ve heard it called a buying panic, a melt up, or simply traders doing what traders do — chase strength. But no one should call it irrational exuberance, a term first used (quite prematurely) by Alan Greenspan in the late 1990s. Investors are not irrational at all. They have reasons to be increasingly bullish.

The U.S. economy rose at an annual rate of 2.8 percent for April through June.
Household spending, the main driver of the U.S. economy, increased at a quicker pace as Americans’ incomes continued to rise. There’s more good news: The personal consumption expenditures price index, the Fed’s favored inflation measure, cooled to 2.5 percent from a year ago. That’s not far from their 2 percent goal.

While the media are focused on politics financial markets are going their own way, as they always have in the past, no matter the election prospects. Investors were never so distracted that they forgot that investing isn’t a bet on the president, it’s a bet on Corporate America. It is all about future earnings and interest rates. Allow for large daily swings, as we keep seeing, but in the end it all comes down to earnings and interest rates.

The near certainty that rates will be cut in September, and likely soon thereafter, coupled with earnings growth and the impact of AI, is driving stocks higher. Reports still to come on second-quarter earnings will help too, except perhaps for some high-profile tech companies that are priced for perfection.

Over several articles I warned that a bull market driven only by a few technology stocks wasn’t sustainable. Since then, the broader market played catch-up. Over the last month the tech heavy Nasdaq 100 Index fell 3.4 percent while S&P Mid-Cap Index rose 5.3 percent and the S&P Small-Cap Index jumped 10.7 percent! I can’t recall such a quick and dramatic rotation.

For investors focused on growth with income, my focus remains on stocks in four sectors — energy, utility, healthcare, and financial services. Holdings include Williams Companies (WMB), Oneok (OKE), Merck (MRK), Amgen (AMGN) and Bank of America (BAC). My favorites all pay dividends and most if not all will raise them year after year. Add in Ares Capital (ARCC) and some exchange-traded debt and you have a recipe for rising total returns and better days no matter the election results. That is a winning strategy.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.