Monday, March 9, 2015

Stock Market: Happy 6th Anniversary Bull Market - More Will Come

(Drivebycuriosity) - Today the bull market celebrates his 6th anniversary. Since March 9, 2009 the S&P 500 gained 205% and the Nasdaq 100 jumped 319% (bespoke).  In the recent 6 years stock prices have been following the healing global economy, especially the recovery of the US, and climbing company profits.

According to Bespoke the current bull market now ranks 4th in terms of longest bull markets on record (historical). No. 1 is the period from 12/4/1987 until 3/24/2000 (12,3 years) with a gain 582%!. I do believe that the current bull market has still some years to go and could even beat the current record holder.

In the long run the US stock market gains on average 7% p.a. So, stock market gains are the rule and dropping stock prices (including corrections & crashes) are the exception. But I believe that 2015 will be another year with over-average stock growth, meaning a plus of 10% at least.


                                                      Virtuous Circle

It seems that the U.S. economy entered a virtuous circle. Inflation & interest rates are at record lows (even if the Fed will start hiking her interest rates in June). The US job market is getting stronger, creating monthly almost 300,000  new jobs. Low jobless rates & weekly jobless claims reduce the risk of losing ones job and lift the optimism of consumers & investors.

Since spring 2009 companies have been reducing costs & debts and have been getting more efficient & productive. I assume that this year companies will respond to economic growth and their expanding markets. They will lift wages more than in recent years in oder to gain manpower for their expansion (Wal-Mart`s wage hike could be the starting signal).  Therefore the growth of personal incomes in the US will accelerate fueling consumer demand.

The global economy is getting a lot of tailwinds from cheaper commodities (driveby). The sharp price drops for oil, industrial metals and some agricultures work like a gigantic tax cut. Companies have lower costs, meaning more money to invest (including into a rising labor force), and consumers have more money in their wallets. More jobs, faster rising wages and much cheaper gasoline should speed up consumer spending in the US significantly which will boost the global economy (US imports = rising European & Asian exports). I also believe that the technological progress is fostering globalization. Emerging countries like China and India have easier access to new technologies which is promoting their transformation into modern economies (see for instance Alibaba). These processes are working together, creating global economic growth in the decades to come.

The positive macro trends (inflation, interest rates, consumer spending) and the continuously rising efficiency (thanks to technological progress like Internet, other software, robotics, 3D-printing and more) will translate into higher company profits - the engine of further stock market gains.


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