Published on Friday, 29 August 2014 13:34
Written by Marc Courtenay
My friend Alex Green, the Chief Investment Strategist for The Oxford Club, has a track record that beats the S&P 500 and the Dow Jones Industrial Average over the past 15 years. When you read his lists of reasons to continue to be bullish right now, well, these reasons can't be ignored.
Alex is tall, handsome and modest. He's aged gracefully but will always be younger than me. He loves history, philosophy and the quest for spiritual wealth. To add a personal touch I'm going to show you his most recent photo with his article.
At the end of the article is a link to another good article about 11 big cap stocks that are still bargains. If you've been bullish about the stock market you might also recall that savvy investors always look for stocks that are still deals. But first, Alex...
Just a few weeks ago, the bears started thinking things were finally going their way.
But it didn't work out that way... again.
This week, the S&P 500 closed above 2,000 for the first time. The Nasdaq hit its highest level in 14 1/2 years.
And so the bears have gone back to grumbling about how stocks are trading on nothing more than hot air, an accommodative Fed and lots of hopes and prayers.
Nothing could be further from the truth. There has been a ton of good news lately. It's just that you have to dig through all the noise to get to it.
Here are eight solid reasons to be bullish now:
After an abysmal first quarter, second quarter U.S. economic growth was just revised upward to an unexpectedly strong 4.2%.
Job growth is improving. According to the Bureau of Labor Statistics, compared to last year, unemployment is down in 49 states, Washington D.C., and Puerto Rico.
Remember the complaint that the recovery was only in low-wage jobs? Not anymore. According to the National Employment Law project for The Washington Post, hiring has picked up steam in construction, manufacturing and professional services in recent months, sectors with a median wage of at least $20 an hour. Jobs that pay higher wages are coming back.
Natural-gas prices, buoyed by forecasts for a hot summer, have slid more than 20% since June due to unseasonably cool weather.
Globalization is leading to greater prosperity. The McKinsey Global Institute recently estimated that the value of all cross-border trade, money and services is now over $25.9 trillion, an all-time record. Today, 35% of all goods cross borders, up from 20% in 1990.
The digital age is still ushering in all sorts of new innovations. Uber, for instance, has led to amazing price reductions and efficiency improvements in the taxi industry. And technology is still bringing disruptive improvements: next-generation smartphones, disease-killing medicines (like Gilead's Sovaldi) and new oil and gas drilling techniques.
Remember all the nattering about insolvent Chinese banks - and how their imminent failure would spark a financial panic? It isn't happening. The Wall Street Journal reported this week that Chinese banks are in the process of raising $300 billion in debt and equity to beef up reserves.
Public companies have reported second quarter sales and earnings that are ahead of expectations. According to Forbes, 64% of U.S. firms are beating revenue expectations, a much higher rate than normal. That stronger sales growth is leading to better-than-expected profit growth: up 8.4%. That's the second-highest earnings growth rate since the fourth quarter of 2011.
And while we're on the subject of profits, here are three more reasons to be bullish: U.S. companies are reporting record corporate profits. They are enjoying all-time record corporate profit margins. And corporate profits as a percentage of GDP are an all-time record too.
So if you bump into a bear who tells you there's no reason for the stock market to be hitting new highs, tell him to go back into hibernation.
As my friend Dr. Mark Skousen likes to say: "Bears make headlines. Bulls make money".
There you have one of the successful realists in investing today. Alex, like yours truly agree, with the two old axioms, "don't fight the Fed" and "the trend is your friend". After the long Labor Day weekend in the U.S. perhaps we'll catch a break in the action.
A nice pullback for several days will help the repentant bears to mend their ways and get into a bullish mode. If you don't want to be thought of as a bull or a bear, just consider yourself a wise owl that follows the wisdom of realists.
There's a terrific article from the end of August titled "Beyond S&P 2000, eleven big stocks that are still bargains". I suggest you study it over the next few days and pick a few that inspire confidence and optimism in your investing habits.
One of them is an airline stock trading at around $39.50 with a forward PE ratio of only 10 and a one-year price target over $50-a-share. It even pays about a 1% dividend. So do your homework by reading this article followed by a re-read of what Alex wrote above.
Wishing you good results and good fortune!
Disclaimer: Nothing in this commentary should be construed as investment advice or guidance or any recommendation to buy or sell any financial instrument. It is not intended as investment advice or guidance, nor is it offered as such. It is solely the opinion of the writer, who is NOT an investment counselor/professional. All content of this commentary is solely an expression of his personal interests and is posted as free-of-charge commentary and is subject to error and change without notice. Please do your own due diligence before investing in ANYTHING. The presence of a link to a website does not indicate approval or endorsement of that website or any services, products or opinions that may be offered by them.