Thursday, July 11, 2013

Never Underestimate this Bull

The US stock market is the only game in town.  It is now considered safer than Treasuries!  You have such a supply and demand imbalance, not enough US equity being supplied, demand from asset managers who now believe that the US is the best house in a bad neighborhood, from corporations buying back stock because they have no need to invest their cash.  All of this is fueled by a drive for yield which now has investors shunning junk bonds for equities! 

Going down in the corporate structure to the riskiest asset which now is considered the safest.  Yet, we still have plenty of die hard bears who cannot accept that stocks can go up without a strong economy.  It can be confusing to wrap your mind around this market when looking at 1) long term fundamentals, 2) short term asset manager positioning, and 3) supply and demand. 

But 2 of the 3 favor higher equity prices, only the long term fundamentals favor future equity weakness, but the last 20% of a move is notoriously irrational and make no fundamental sense.  Think Nasdaq in 2000, China in 2007, global equities in early 2009.  So we are in that last 20% of the move here, so we could get up to 1800 on the S&P for no other reason then its the only asset that is viewed as safe.

No comments: