There’s been a lot of talk about how the stock market might be overbought, overpriced and headed for a “correction” soon. Many investors spend most of their time trying to determine when they exit. There are a few experts, however, who take a much more long-term view.
Tom Lee, market strategist at Fundstrat Global Advisors said on CNBC recently, "It's more like 2029 is the peak of this equity market cycle and then the S&P is 6,000 to 15,000."
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Are You Serious Clark?
If Lee is right, the S&P 500 Index (SPX), which has advanced 326% since its previous low March 6, 2009, could gain an additional 11 – 428% between now and 2029. Lee bases his predictions on a contention that the global business cycle is only at its midpoint. Lee’s primary indicators are auto sales and housing starts. He also thinks more investors will shift funds from bonds to stocks in search of better returns, a move that could provide further positive influence on stock prices. Others with similar views include Barron’s which sees strong worldwide economic fundamentals with no hints of a recession in sight and Ari Wald, head of technical analysis at Oppenheimer & Co., who believes stocks could rise as much as 130% over the next year.
On The Other Hand
It wouldn’t be Wall Street if there were only one point of view. Bank of America Corp.’s (NYSE:BACF) bull and bear indicator sees the end of the bull market on the horizon. According to BOA, market sentiment is displaying its highest sell rating on the S&P 500 since March 2013. Equities strategists at Bank of America see a likely pullback in the S&P 500 in February or March. According to BOA its indicator has flashed 11 sell signals since 2002 and has an accuracy measure of 100%.
We Are OK For Now
On average most market watchers see no sharp reversal to the stock market anytime this year. After 2018, however, they are likely to point to potential potholes in the road. One major concern, of course, is the length of the current bull market. From 2009 to now is a long time by historical standards but not unprecedented. There are other potential signals, any one of which could burst the bubble – if there actually is a bubble – that could spell disaster for not only the U.S. but the global stock market.
Signs Of The Times
These potential signals include a spike in inflation, especially one that is not expected. Basically, this means inflation that picks up faster than the Federal Reserve foresees. Another potential problem would be if central banks worldwide tighten too quickly. Alternatively, one could imagine an “America First” themed trade war and the potential negative impact that could have to hurt U.S. sales globally.
And what about a real war? Armed conflict between the U.S. and North Korea or in the Middle East or other global hotspots around the world could shake the very foundation of the market. Perhaps as much as anything else there’s concern that expectations have become too high. If investors become complacent or too certain that stocks will continue to climb that could spell trouble or the initiation of a black swan event.