Despite conflict in the Middle East, Brexit, trade tariffs, this is why it will be a good 6 months to year end for stocks:
Reasons why it will be a good year for stocks:
1. Our expectations are beaten down, so there will be upside surprises – that’s how the markets work!
2. Bonds are less attractive – it’s the way lingering effects of quantitative easing works, so stocks look more attractive.
3. All the big banks are pushing their clients into stocks still
4. Flagship companies continue to do well, the leaders tend to pull up laggards
5. More emerging economies are coming on strong like the N11 – the names to countries smaller than the BRICS of Brazil, Russia, India, China, and including Vietnam. These help raise sentiment.
6. The US is addicted not just to debt, but growth, and will do whatever it takes for growth, including debt issuance. As my tutor at university always said, the US has one paramount advantage – it owns the printing presses to the world’s reserve currency. In one sense it actually has no debt at all.
Warning Sign 1: The Dow Jones industrial Average, ‘the Dow’ which is currently near its all time high, keeps sliding. I don’t think this will happen.
Warning Sign 2: A Dollar will buy one Euro. It currently buys 0.9 Euros. Close you may think. Actually, you would have to go back to 2003 for last time that happened.
Warning Sign 3: Gold will hit $2,000. I’m kidding. That isn’t a warning sign at all. Gold got close and the world survived.
Warning Sign 4: The price of UK stocks is so low that that the dividends the average dividend of the top 10 best paying largest UK companies (those in the FTSE 100) goes over 10%.
Warning Sign 5: The pound only buys one Euro. At the moment it buys 1.1 Euros. Close? We would have to be at an all time low weakness for the pound for this to happen.
Warning Sign 6: The FTSE 100 goes below its low points of 2010 and 2009, ie below 4,800. It’s currently at around 7,500.
Warning Sign 7: Lack of profits in companies. You may think this has happened. With the current markets of the 100 largest UK companies, very few showed a loss in their most recent accounts. By the way, the most profitable hit over £10billion in profits