cnn ). Stock prices have been accompanying the healing global economy, especially the recovery of the US, and climbing company profits.
nyu.edu/ investopedia). So, stock
market gains are the rule and dropping stock prices (including
corrections & crashes) are the exception.
I claim that we are in a secular bull market
that could even dwarf the stock market rally from 1982 till 2000
when the Dow Jones jumped from just 800 points to around 10,000 points.
My claim is mainly based on three arguments:
1. Company profits will continue their solid growth. During the
recessions of the years 2001/02 and in 2008 companies restructured and
reduced costs significantly in order to survive. Now they are much
fitter and more efficient than before. I believe that this learning
process will continue and will translate into a long term trend of rising
2. We are experiencing a new industrial revolution. Advances in
Internet, mobile computing, 3-d-printing, robotics, nano- &
biotechnology and other technologies are reducing costs, raising efficiency
and creating new markets.
3. If the new US president comes up to his promises and will reduce regulation & taxes and invests into the US infrastructure company profits will even climb faster.
4. We also are having solid tailwinds from the emerging markets which are even getting stronger. The
catching-up process in China, India, Indonesia and a lot of other countries
translates into high growth in large parts of the global economy that
creates continuously rising revenues & profits for global companies
like Starbucks, IBM, Caterpillar, Apple and other members of the S&P 500 (world).
I don´t fear that the Fed will spoil the expected stock market gains,
even if Yellen & Co. will hike their interest rates three times as
they had already projected. History shows that stock
prices & interest rates can happily rise together: The Bank of
America Merrill Lynch (finance)
notices that “the 1950s was a period of higher stock prices and higher
US interest rates. The US 10-year yield bottomed near 1.5% in late 1945
and the S&P 500 remained firmly within its secular bull market until
yields moved to 5-6% in the mid 1960s. The S&P 500 rallied 460%
over this period.”