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Stock Market Will Reach Record Highs Within 2 Years!
Recent market action is causing much anxiety [with] pundits hyperventilating about sovereign loan defaults. [Now,] after Ireland, their attention is focused on Spain and other European countries. The world seems to be filled with worryworts (which is bullish as the market always climbs a wall of worries) [- but worry not]. In terms of magnitude and duration, this bull market will surprise all. In fact, what investors are witnessing is one of the greatest bull markets on record. Within two years, the DJIA and the S&P will reach record highs. Beyond that, the S&P could well double from the current levels. Words: 852
So says Leon Tuey in a Financial Post article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited […] below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Tuey goes on to say:
Lest you think I’ve taken leave of my senses, consider the following:
Earnings Will Explode
1. History shows that the more severe the economic downturn, the more powerful and more enduring is the subsequent bull market. This has been true for the last 100 years. In a severe economic downturn:
a) the Fed eases more aggressively and maintains an accommodative stance much longer than normal…. [and].
b) corporations become leaner and meaner…[putting them] on sounder financial footings [so that] when the economy rebounds, profit margins explode. Indeed, this is precisely what is happening. Not surprisngly, earnings have been beating estimates and continue to do so [and] when the recovery gathers a real head of steam, earnings will explode…
Tech and Financial Sectors Will Go Much Higher
2. The S&P 500 Index is a weighted index [and] with techs and financials being the biggest weights…
a) Many of the large tech companies have broken out of long bases which point to a secular bull market. These stocks will reach heights investors will never believe. Moreover, despite the spectacular gains achieved to date, these stocks remain attractive from a valuation standpoint as many are selling in the 12X-15X earnings multiples, but growing in the 18%-25% range and companies are sitting on mountains of cash…
b) Financials, the second biggest weight on the S&P, have become leaner and meaner. After more than 15 months of consolidation, the sector is re-accelerating and starting to show out-perfomance. The bull market has resumed for the financials.
Given their heavy weighting, continued strength in the tech sector and the re-acceleration in the financials will give the popular market averages a huge lift.
3.5% Growth Predicted in 2011
3. Despite the widespread concern regarding the economy:
a) many economy-sensitive issues… are posting record highs and telling investors that growth is re-accelerating
b) many of the late-cycle sector such as aluminum, coal, energy, paper and forest, and steel… [are] bottoming and starting to turn up.
Indeed, this week, Alan Greenspan is predicting 3.5% growth in 2011. As normal, at this stage of the cycle, strength broadens.
Wall of Worry Bullish for Market
4. Sentiment backdrop is ideal for a powerful, enduring bull market. In the last ten years, investors have been traumatized by two huge bear markets – the burst of the tech bubble and the burst of the financial bubble. Pain remains fresh in their memory. Although the bull market is more than two years old, investors remain wary and keep finding things to worry about. This is a bullish sign because the market always climbs a wall of worries. It is when investors stop worrying and become euphoric that it is time to really worry.
The Market is the Leading Indicator
5. Broad market measures such as the NYSE Advance-Decline Line and the Value Line Arithmetic Average have been posting record highs. Investors must appreciate the fact that the economy doesn’t lead the stock market. The market leads the economy for the market is a leading economic indicator. When the economy is booming and full employment is at hand, the market is about to roll over.
Conclusion
The “deflationists,” the “double dippers,” those who were babbling about “head-and-shoulders” top, the “Death Cross,” the “Hindenberg Omen,” and those who told investors to “sell everything” earlier this summer, clearly don’t have any understanding or appreciation of the points detailed above. [You now do so there is no need to be a worrywort. Just position yourself to take full advantage of what is unfolding:]
The stock market will reach record highs within the next 2 years and double that in the years beyond!
* http://business.financialpost.com/2010/12/20/one-of-the-greatest-bull-markets-in-history/#ixzz18mwnq72G
Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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