Tuesday, July 1, 2014

Stock Market 2014: Year Of The Bull Part II?

(Drivebycuriosity) - The US stock market (S&P 500) gained 6.1% for the first half of 2014. I believe that this rally will continue in the second half of the year:

1. The majority, including many fund managers, is still too pessimistic. The majority is underestimating the strength of the global economy. Many missed the rally which started in spring 2009 and are still sitting on huge cash reserves. Many are betting on a crash - or at least on a serious correction. For all of them the pressure is rising.

2. Companies are also holding high cash piles. This leads to a flood of share buy backs and dividend hikes. Both make stocks more attractive.

3. There is a deluge of mergers & acquisitions. This is a signal that the CEOs are optimistic, that they trust in the global economic growth and consider stocks (of many companies) as reasonable priced.

4. Interest rates are still extremely low because central bankers don´t want to risk an economical setback and inflation rates are constraint.

5. The US economy is better than many think and seems to accelerate as the recent purchasing manager indices show. In the second half of the year the US economy could get get some tailwinds from China which looks stronger than some months before and the healing process of Europe.

6. Company profits should climb faster than the analysts expect because the global economy is gathering strength. Helpful are efficiency gains thanks to automation & Internet.

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