There have been a lot of threads lately about imminent collapses and crashes, and yet the market continues to hit all time highs. Corporate profits are expected to increase for the foreseeable future. The Federal Reserve has done an incredible job of ensuring that rates are low enough so as to spur economic growth but high enough to prevent inflation. The Chairmen (and women) have found an economic "goldilocks" zone where stockholders are confident that growth will continue but also confident that it will be slow enough that rates will not increase much beyond where they are now. Low volatility reflects the Federal Reserve's ability to charter a steady course. The markets have figured out that things are, and will continue to be, more steady than they have ever been before. I actually think we will see a sub-8 VIX sometime in 2018 if not 2017.
Banks are situated better than they have been since the 1950s. The summer stress tests proved that. ISIS has been defeated, and let's face it--North Korea is not going to risk it's existence by doing something stupid. They are trying to garner attention, but at this point it's like the story of the boy who cried wolf.
The political realm is not without its problems, but there is absolutely no need to change current legislature to keep stocks going up. We really are in a new paradigm. If you look at the economic history of the U.S., it's full of huge whipsaws--until the early 1980s, when steady growth became the new normal. I'm not sure why this is (I'd be interested to hear any ideas), but my pet theory is that the Federal Reserve's economic models are vastly more superior than at any time before. Improvement in these models has allowed them to charter a steady path forward. The 2008 recession was this generation's Great Depression. Just like it took 75 years for another crash that bad to happen, I don't think we will see anything like 2008 for another 75 years--or even more.
Based on long term interest rates (30 year treasury rate is 2.77%), this is the most stocks have been undervalued since August 2015, July 2012, and October 1998. Ask yourself; one year beyond each of those dates, where did the market go? In all seriousness, there is no reason to not buy both stocks and bonds at this point, but stocks are clearly the better deal.
My short term target for the S&P 500 is 2600 by the end of earnings season in late October. Longer term, I see us crossing the 3000 threshold by early 2019 (just extrapolating the trend). Here's where I will go out on a bit of a limb: the S&P will pass 5000 and the Dow will pass 36,000 by the end of Trump's second term. Yes, I am assuming Trump will be re-elected. I realize a lot of us don't like some of his more controversial moves, but as Bill Clinton said, "It's the economy stupid". And there is absolutely no reason to think the economy will not continue on it's current trajectory far into the future.
I am fully invested in SPY at the moment, and I suggest you do the same. I'm interested to here other's strategy's going forward (although I believe time in the market is better than timing the market, I still like to hear the variety of things people have tried at that have failed or worked). Thoughts?
TL;DR Buy SPY.
Submitted September 15, 2017 at 08:56PM by UrbanIsACommunist http://ift.tt/2ydhYoV
