I predict that the stockmarket is putting in a major bottom for the year right now. While Jamuary could end up "flat" relative to where the market finished off in December (S&P 2043), these deep lows that we are seeing now should be bought without question.
There are three reasons.
First, we will soon be entering into what is seasonally, the most powerful fiscal time of the year, where fiscal injections skyrocket due to tax refunds. Last February saw nearly $460 billion of net spending in a sigle month. Huge. This is highly supportive. The market rallied 5.5% and 8% the year before when there was also $460 billion of injections.
Secondly, everyone is selling for all the wrong reasons. They don't udnerstand what's happenig in China, the transition of that economy from an export driven model to one of domestic consumption. This takes time and it's disruptive, but it's also a long-term positive. The volatiltiy, lately, is realy due to the Chinese authorities messing around with stupid, Western-oriented economic ideas, currency manipulation, monetary policy, etc. However, as we showed here a couple of weeks ago, Chinese gov't spending is surging. That's ultimately very supportive.
Finally, the U.S. economy is doing pretty nicely. We saw the jobs numbers today. They were way better than expected. Employment and withholding taxes collected by the Federal gov't are surging, giving no indication that the job market is topping out.
I'll even throw in a fourth reason, which is something that I don't usually pay attention to, but some people do. The deficit is growing again. That's right, for the first time in six years the deficit is expanding. I wonder what some people will say?
Anyway, that's my forecast.
9 comments:
100% Agreed...
Your #1) Those automatic contributions to 401k accounts that maxed out in the summer have restarted.
Your #2) China is doing a strategic reevaluation not a strategic devaluation (China's foreign currency reserves tumbled by a record $108 billion in December as the central bank sold dollars to stem the slide in the currency, not cause it).
Your #3) Exactly right.
:)
Millennial job holders spending habits are much different from their predecessors. Many are still living with parents too because of their shitty paying jobs. They are not buying cars and homes like their parents did at the same age. They sure as heck don't have excess dollars to plunk in 401k accounts either. In fact much of the job growth over the past year went to those over 54 yrs old, and they don't spend on consumer goods anymore than the new generation of millennials.
None of this is to say that markets aren't near a bottom--they very well might be. The average market gain in a Presidential election year is 9.5% so history is on the side of a bottom not being too far away. But that doesn't mean the market is going to rocket north either. One thing in my mind is for certain. A big caveat regarding my bullish bias will center around if the Fed keeps raising rates then I'll make a gentleman's bet that stocks will roll over and continue their downward spiral with no bottom in sight.
Bold call, Mike. I like it!
Echoing my above post:
"only 16,000 out of 485,000 jobs went to people between the ages of 24 and 55"
http://www.cnbc.com/2016/01/08/art-cashin-not-impressed-with-this-jobs-report-heres-why.html
Malmo, maybe the millennials that you know aren't saving in a 401k but most others are:
http://time.com/money/3532253/401ks-millennials-saving-increase/
http://www.cnbc.com/2015/10/19/gen-y-gets-an-a-in-401k-plan-participation-study.html
http://www.cnbc.com/2015/05/13/millennial-participation-in-401k-plans-surges.html
Those accounts are where stocks that are now rolling over and spiraling downward will wind up...I'll take your bet.
Edward,
It's only a gentleman's bet--if the Fed continues its rate raising THIS YEAR, then the market continues to roll over. Still, there's no dogmatic certainty with me when it comes to stock markets. My bias in the long pull is for an upward trajectory and history bears that out. But we do get monstrous selloffs too, and for a myriad of reasons. And one can't seriously deny vicious boom and bust cycles over the past 25 years. The Fed taking away what was left of the punch bowl in no way makes me bullish so until it reverses course I'm covering all my equity bets. My money is where my mouth is.
Malmo, in that case, I'm not saying 'you're wrong' about this year, I'm just saying 'I hope you're wrong' (and if there is a monstrous selloff this year, hopefully I'll have the gonads to buy).
I hate to ask such a noob question, but I want to start investing, mainly a roth ira, with some occasional regular trading too.
Does anyone have a preferred online broker to use? etrade, scottrade etc? Any reason to use one over the other?
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