Why This Bull Market Can Continue

"The reports of my death are greatly exaggerated." ~ Mark Twain

Recently, there have been an increase of articles cautioning the end of the bull market.   The reasons are numerous:  the longevity, PEs, increasing interest rates, narrowing breadth, geopolitical uncertainty, and, of course, Donald Trump, whose actions extends the list of specific concerns further.

It is a great list of concerns.   However, I think the opposing view, that the bull market can continue, has merit also.

  • This is the slowest post WWII economic recovery.  One would have expected a steep recovery given the depth of the recession.  However, the slow recovery may be delaying a future recession since business have not yet over invested and created excess capacity.
  • Businesses are still cautious.   Most businesses seem to be still under investing and cutting costs, especially the industrial ones.   No one seems expect an economic boom. 
  • Still a great deal of pessimism.  Almost everyone I know thinks this bull market is unsustainable will end.  And there has been a increase in people predicting the onset of a bear market since the election of Donald Trump.  Bull market die when there is excessive optimism and irrational exuberance, neither of which are evident at this time.
  • Finally, it is questionable whether this bull market started in March 2009 (bottom of bear market), March 2013 (crossed previous high), or Feb 2016, (the latest major correction).  So this bull market may not be that long in the tooth.
My sense is that this market is still intact, but may be vulnerable to a significant external event.  But until then, this bull market can continue.

For more on  Reflections and Musings, check back every  Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

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