2017 Bull Market: The Time to Leave the Bears Behind

Holy moly, the Dow Jones index in the US is mighty close to hitting 20,000 points. Overnight it flirted a little closer once again. How long before it goes above and beyond? Not long, in my view.

So far, the beginning of 2017 is proving a lot less stressful than 2016. Last year, the Dow had its worst start to the year since 1932. A year is a long time in the market.

The bulls just keep running. 2017 could prove to be very profitable for those in the market. Will you be there? I hope so. Opportunity is knocking!

And why shouldn’t the market be pushing higher? The US economy is a lot stronger than its given credit for. Over at Cycles, Trends and Forecasts, we’ve been saying that since we launched three years ago.

All the time, we’ve been told why it can’t happen. We’ve been told the market is overvalued, there’s too much debt, and it’s all a central bank mirage anyway.

The whole time, the market and the US has kept surprising to the upside.

The growth is real. An analyst I saw quoted in The Australian yesterday did a nice job of showing how the market is telling us this. See for yourself…

The Russell index (the Russell 2000 index, which tracks US small-cap stocks) hit an all-time high in mid-December.

That is confirming that the 10-year rally is being driven by economic growth in the US. US economic data continues to be strong and Chinese data is surprising on the upside.

Small business is an engine of growth in any economy. Don’t forget that employment is close to a record low in the US as well. And if you want even more reasons to be positive on economic growth and markets in 2017, turn your eyes to Britain.

The main index in the UK — the FTSE 100 — went into all-time highs over the break after Christmas. The news is, at least in part, coming out now to tell us why. Bloomberg reports that manufacturing in the UK grew at the fastest pace in two and a half years in December.

And we can’t forget Spain. It was practically the posterchild of the 2008 crisis, not to mention one of the fabled PIIGS. (PIIGS is an acronym used to refer to the five eurozone nations that were considered weaker economically following the financial crisis: Portugal, Italy, Ireland, Greece and Spain.) We all remember the 20% unemployment and marches through the streets. ‘La crisis’, they called it.

I remember writing in December 2015 that Spanish property bargains were going as investors bought up prime properties and the bad debts began to clear. I went back and had a look at how I finished up the article at the time. ‘If you do want that little Spanish place, you’d know not to waste a minute and go get it. It won’t be this cheap again.

Occasionally I get it right! Reuters reports that the Spanish property market is going through the roof. Here’s a snippet: ‘Rents and mortgages are surging, the prices of hotels and resorts are sky-rocketing and a round of mergers and acquisitions have broken out among major property investors.

I can vouch for at least some of that, anecdotally at least. I spent five months in Spain last year.

Looking back, 2016 was volatile, but it was profitable if you were in the market. 2017 will probably dish up something similar.

The world’s rich aren’t complaining. Apparently, the rise in asset markets over 2016 — despite the China scare, Brexit and the surprise Trump win — saw their net wealth up by US$237 billion.

I guess we could say the US is well and truly getting back to normal. Here’s an interesting thing. Remember how, after 2008, all the politicians and regulators came out with the rhetoric about making sure a crisis like that never happens again?

Well, knock me down with a feather. The Wall Street Journal reports that ‘house flipping’ is making a comeback in the US. These guys buy and sell houses in a matter of months.

The WSJ calls the flippers a potential symbol of the real estate market’s excess in the run up to the GFC. Yep. But skyrocketing real estate values in the key cities of the US mean the game is back on. You can guess where this ends up eventually, can’t you? Over at Cycles, Trends and Forecasts, we can give you the timing on that to ride the boom before the inevitable bust.

The key shift happening now is not actually the flippers, but the banks. Credit is becoming easier to get in the US. It’s been very tight since 2008, except for the very best (that is, wealthiest) clients. So around we go in circles. It’s expansionary in the beginning.

Like we keep saying over at Cycles, Trends and Forecasts, what happens in the real estate market drives the economy. This cycle has been repeating for 200 years. All the signs point to a very big boom brewing worldwide. Stocks and property will keep going higher. Go here to see exactly what I mean by that.


Callum Newman,
For Markets and Money

Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.

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