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Stocks: Much Higher Highs to Come
By Dr. Steve Sjuggerud
Thursday, September 10, 2015
This bull market in stocks is not even close to over yet.
Stock prices should have much higher highs ahead, based on the weight of the evidence.
Both the short-term picture and the long-term picture are just about perfect for higher highs.
Let me explain...
In the short run, now is a good time to buy...
Investors are scared. We hit a "record" negative sentiment extreme, according to Jason Goepfert (of www.SentimenTrader.com). While you can measure this in a variety of ways, history tells us that almost all of those ways suggest a dramatically higher stock market 12 months from now. (We recently wrote about two of these reasons here and here.)
In the long run, the picture is pretty darn good, too...
Stock prices hit their ultimate peaks when:
Neither of those conditions are in place today.
The simplest conclusions are:
We're somewhere in the middle...
For example, our True Wealth value indicator (which is simply the price-to-earnings ratio PLUS short-term interest rates) actually says that stocks are hardly expensive. We are definitely nowhere near the valuation extreme we saw in the dot-com bubble in 2000. Take a look:
We're definitely not at the bottom like in 2008-2009. But we're not at the top, either.
Meanwhile, investors are not WILDLY OPTIMISTIC... They're still far from it.
One way to see this is by looking at consumer confidence versus the stock market:
Consumer confidence peaked in the late 1960s, in 2000, and in 2007 – right in line with the major stock market peaks.
Consumer confidence bottomed at stock market bottoms as well, in 1982, 1991, and 2009.
Today, we are clearly not at the bottom in confidence. But we're not at the top, either. This is not 2000.
Summing up, on both short-term and long-term indicators, stocks look just fine. They actually look like they have plenty of upside potential left.
The weight of the evidence tells me that now is not a time to bail.
Please follow your trailing stops, in case I am wrong... But the historical evidence is pretty strong here. Stocks could do very well over the next year. I feel confident – based on history – that we'll see higher highs in the U.S. stock market.
Good investing,
Steve
Stocks: Much Higher Highs to Come
By Dr. Steve Sjuggerud
Thursday, September 10, 2015
This bull market in stocks is not even close to over yet.
Stock prices should have much higher highs ahead, based on the weight of the evidence.
Both the short-term picture and the long-term picture are just about perfect for higher highs.
Let me explain...
In the short run, now is a good time to buy...
Investors are scared. We hit a "record" negative sentiment extreme, according to Jason Goepfert (of www.SentimenTrader.com). While you can measure this in a variety of ways, history tells us that almost all of those ways suggest a dramatically higher stock market 12 months from now. (We recently wrote about two of these reasons here and here.)
In the long run, the picture is pretty darn good, too...
Stock prices hit their ultimate peaks when:
| 1. | Stock values get OVERLY EXPENSIVE, and |
| 2. | Investors are WILDLY OPTIMISTIC. |
Neither of those conditions are in place today.
The simplest conclusions are:
| 1. | We're definitely not at the bottom, but |
| 2. | We're definitely not at the top yet, either! |
We're somewhere in the middle...
For example, our True Wealth value indicator (which is simply the price-to-earnings ratio PLUS short-term interest rates) actually says that stocks are hardly expensive. We are definitely nowhere near the valuation extreme we saw in the dot-com bubble in 2000. Take a look:
We're definitely not at the bottom like in 2008-2009. But we're not at the top, either.
Meanwhile, investors are not WILDLY OPTIMISTIC... They're still far from it.
One way to see this is by looking at consumer confidence versus the stock market:
Consumer confidence peaked in the late 1960s, in 2000, and in 2007 – right in line with the major stock market peaks.
Consumer confidence bottomed at stock market bottoms as well, in 1982, 1991, and 2009.
Today, we are clearly not at the bottom in confidence. But we're not at the top, either. This is not 2000.
Summing up, on both short-term and long-term indicators, stocks look just fine. They actually look like they have plenty of upside potential left.
The weight of the evidence tells me that now is not a time to bail.
Please follow your trailing stops, in case I am wrong... But the historical evidence is pretty strong here. Stocks could do very well over the next year. I feel confident – based on history – that we'll see higher highs in the U.S. stock market.
Good investing,
Steve
