History does not repeat itself, but sometimes it rhymes, and the way I see it, this market is starting to look a lot like the late 1990s.
We have a Democrat in office, and a desire on the part of Washington to create a sort of wealth effect to get us out of this stubbornly slow economy that has been plaguing the US (and the world) for years.
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While there are many theories on why the “Great Recession” happened, and many more about what the outcome will be, I believe that the equity markets are headed higher, at least until President Obama is out of office.
First of all, Ben Bernanke is a professor, and his expertise is the Great Depression. During the Great Depression, our government attempted many measures to stimulate the economy, but in retrospect, they did not do enough, so the economy slid back into Depression for many years.
Due to this fact, Bernanke is very reluctant to withdraw stimulus. In a sense, if you think of this economic downturn as creating a giant hole in investor’s net worth, Bernanke is attempting to fill in this hole by inflating assets, so that investors and the general public grow and maintain the confidence needed to spend, invest and hire.
So I believe that we are in an “asset driven economy” as opposed to an economy that is driven by consumption/ demand. In order to make money in this economy, you have to be in the right assets and right now, the agenda dictates that stocks are the way to go.
There is a lot of research suggesting that you can simply buy the most out of favor asset class at the beginning of each decade and focus on that area. As far as I can tell, after the worst rolling 10 year period in 100 years (from 1999-2009), that asset class is stocks. I look forward to updating my investors and followers as this market progresses. In the meantime, stay cautiously optimistic.
The investments discussed are held in client accounts as of September 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
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