Nothing seems able to kill the bull.

The summer rally continued today, with the S&P 500 rising to tie the record for the longest bull run ever. The index also set an all-time intraday high. Technology and bank stocks led the way. Regardless of mounting dangers, there’s still money to be made in this market.

Here’s how the post-World War II bull markets stack up (compiled with data from FactSet):

All three main indices closed sharply higher today, lifted by prospects of a possible truce in the trade war. Continued optimism over earnings also cheered investors. For the second quarter, the blended year-over-year earnings growth rate for the S&P 500 so far is a robust 24.6%.

But on trade at least, investor hopes are misplaced.

Fact is, average investors tend to buy and sell at the wrong times. Market tops make them “feel good,” prompting them to pile in when valuations are too high. You need to keep an eye on the long-term horizon, not short-term theatrics.

The insurgent nature of the Trump administration ensures daily uncertainty for the duration of his regime. Ignore the show-biz hype of financial cable news and focus on the hard data, of which there will be plenty to scrutinize in coming days.

On the economic front, keep an eye on weekly jobless claims and new home sales (Thursday) and durable goods orders (Friday).

China’s countermoves…

The protectionists who continue to push this trade war seem to forget that governments don’t pay tariffs — companies do. And these extra costs are passed along to consumers.

There’s also the arrogant belief that the Chinese can’t live without our goods. In fact, many substitutes for American goods are readily available. Notably, Beijing already is upping its purchase of soybeans from other countries such as Russia. Yep, the Russians are benefiting from our trade war with China.

China is the world’s biggest soybean importer. In response to U.S. tariffs, China this season has canceled a huge amount of orders with U.S. producers and nearly tripled purchases from Russia. China also has turned to Brazil to make up the shortfall.

At the same time, China is subsidizing a big increase in the country’s domestic production of soybeans. That leaves farmers in the American heartland out of luck.

It’s also worth noting that the U.S. exports more services than it imports from the rest of the world, for a surplus of more than $230 billion last year. That’s because the U.S. is the world’s greatest incubator of entrepreneurial innovation.

For America, it makes more sense to relinquish the manufacture of routine products to low-wage nations, while the U.S. focuses on more sophisticated, value-added services. Trade statistics don’t fully reflect this U.S. advantage.

China and the U.S. are set to resume trade negotiations this week. Wall Street has garnered much comfort from this ostensible truce, but I wouldn’t get your hopes up. These talks will be low-level and unlikely to produce tangible results. Even Trump himself said on Monday that he expected little from the deliberations.

Seek defensive growth…

Trump’s free market, anti-tax policies get Wall Street’s heart racing, but the president’s brash rhetoric has consequences.

Trump rattled investors yesterday by attacking the Federal Reserve in a press interview. He demanded that the Fed do more to help the economy, complained about higher interest rates, and criticized his own appointee, Fed Chair Jerome Powell.

U.S. presidents historically have avoided criticizing the Fed because the central bank’s independence is considered a bulwark of economic stability. Investors interpreted Trump’s remarks as a check on interest rate hikes. Accordingly, the U.S. Dollar Index (DXY) fell 0.50% today.

In the context that I’ve described above, the following portfolio allocations make sense now as a rule of thumb: 35% stocks, 35% hedges, 20% cash, and 10% bonds.

I disdain the perpetual bears. If you had listened to them, you’d have missed this prolonged bull market. But trade war, high valuations, tightening monetary policy, and rising inflation all give you plenty of reason for caution. It makes more sense than ever to position your portfolio for defensive growth.

Tuesday Market Wrap

• DJIA: 25,822.29 +63.60 (0.25%)
  
• S&P 500: 2,862.96 +5.91 (0.21%)
  
• Nasdaq: 7,859.17 +38.17 (0.49%)
  

Tuesday’s Big Gainers

• Aurora Mobile (NSDQ: JG) +23.40%

Newly public big data firm poised to gain market share.

• Premier (NSDQ: PINC) +14.63%

Health care manager beats on earnings and revenue.

• Cronos Group (NSDQ: CRON) +13.25%

Institutional investors pour into medical cannabis firm.

Tuesday’s Big Decliners

• SeaChange International (NSDQ: SEAC) -44.14%

Advertising software provider reports dismal operating results.

• Jill (NYSE: JILL) -10.46%

Specialty retailer’s earnings and sales fall.

• Coty (NYSE: COTY) -7.10%

Beauty firm misses on revenue.

Letters to the Editor

“You’ve been wary of FAANG stocks. Is tech just too risky right now?” — Aiden M.

FAANG stocks have enjoyed a nice run, but they’re overbought and vulnerable to headline risk. Facebook’s (NSDQ: FB) plunge of 20% last month is instructive. I’m still bullish on the tech sector, but it’s prudent to transition toward smaller-cap stocks with reasonable valuations and less exposure to overseas markets.

Questions about portfolio allocations? Drop me a line: mailbag@investingdaily.com

John Persinos is the managing editor of Investing Daily.