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BNY Mellon and Dreyfus Chief Economist, Richard Hoey, elaborated on the potential for a continuing bull market in stocks (though not without corrections) in an August 7, 2009 interview on CNBC. The Dow Jones industrial Average closed at 9370.07 on that date.
Hoey stated "we are at a particular cyclical moment." Further, he said that the global recession is over and that the leading economic indicators for every major country in the world are rising. "We are going to have rising real GNP for practically every significant country in the world in the third quarter," Hoey stated.
Hoey also said, "I have been here before. We had two severe recessions, one in 1974-75 one in 1981-82. At the bottom of the recession when everybody was so pessimistic as the recession was anticipated to end... the credit crisis eased up, you made a bottom in the stock market and you just rose against this tremendous wave of skepticism... It was a great opportunity after a bad period of performance in stocks, and this feels exactly the same way. The recession bottom was probably June or July. I don't think you ever may lose big money in the stock market buying it at the recession trough."
Hoey's argument has some appeal. There is nothing better to the long stock market investor than a market climbing a Wall of Worry as many investors fear to step in because of a precarious economic situation. They may be caught underinvested or just may never get in.
This stock market rally may be similar to the ascent out of the 1973-74 bear market, which occurred during a decade of generally rising gold and oil prices and a final culmination of these prices in 1980. As I have mentioned repeatedly in my blog, inflation sensitive equities did well in the late 1970's, punctuated by the stock market "October massacres" in 1978 and 1979 when the market fell 11% and 10%, respectively.
However, I would caution investors that fundamentally, our budget deficit, our accumulated public debt, and current account deficit are much worse now than in the earlier bear market periods to which Richard Hoey refers. We are the world's largest debtor nation. Also, the Obama administration is now trying to pass an extremely expensive and hastily considered overhaul of our healthcare system that, if signed, may place much greater strain on our small businesses and country's financial position.
But this does not mean that our stock market cannot go up strongly.
I currently own oil and oil service stocks, physical gold and silver, and agricultural and natural gas ETFs. I also own equities and mutual funds whose prices would not necessarily go up in an inflationary economy.
posted July 28, 2009
posted March 17, 2009
posted February 23, 2009
posted December 8, 2008