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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Nothing Threatens This Stocks Bull Market

Stock-Markets / Stock Markets 2014 Jun 27, 2014 - 05:58 PM GMT

By: Money_Morning

Stock-Markets

Michael A. Robinson Writes: With U.S. stocks at all-time highs, folks are wondering where prices can go from here. After all, U.S. growth is still anemic, the Federal Reserve is rolling back its market assistance and corporate profits aren’t all they could be.

Granted, there will be periodic corrections and unpleasant events that will “shock” the markets into temporary downturns.

But I believe the conditions now in place could foster a bull market that could last 18 to 20 years.


Much of it will be fueled by technology investments and innovation. And the investors who take advantage of it will have a shot at life-changing wealth.

Today I’m going to show you the five catalysts that I believe will fuel this dramatic run. And I’m also going to show you how to go along for the ride.

But if there’s one lesson you should take away from today’s discussion, it’s this: In a generational bull market like this one, you should always have money at work in the market. But it has to be at work in the “right places” …

Nothing Threatens This Bull

As you might imagine, generational bull markets are rare.

Most bull markets last about five years before there is a correction. But with a generational bull market, stocks not only rebound to reach their previous high but go on to set new records.

Between January 1960 and October 1968, the Standard & Poor’s 500 rose 87%. But then it went into a decline that lasted until the early 1980s. By January 1980, the market had only climbed back to break even.

Then came the generational bull market that started in January 1982 and ran until January 2000. Even accounting for the 1987 market crash, this was a great ride for investors.

During that period, the S&P 500 rose from nearly 103 to about 1,500 for an astounding 1,268% gain. After the decline in 2000, it took seven years for the market to get back to break even, only to retreat again with the 2008-to Great Recession.

The current bull market dates back to March 2009, when the S&P 500 hit an intraday low of 666.79. Since then, it’s reached heights of 1,968.17.

That’s a 195.1% gain.

But I think that’s just a start.

Today, a unique set of conditions are in place to take this five-year trend on a long ride.

I call them my Five Generational Bull Market Catalysts. You might call them your road map to wealth over the next couple of decades …

Generational Bull Market Catalyst No. 1: The New Superpowers Emerge

China has become such an integral part of our economy that many Americans forget that it is still a relatively new relationship.

Back in 1980, there was little trade between the United States and China, which President Richard Nixon only opened to the West in 1972. The communist nation began adopting market reforms seven years later.

Those two events set in motion a huge boom in China’s economy. According to the World Bank, in 1980 China’s adjusted-for-inflation gross domestic product (GDP) measured a mere $202 billion, or roughly today’s market cap for Verizon Communications Inc. (NYSE: VZ).

By 2002, China’s GDP grew to $1.2 trillion. By 2012, that figure had climbed to $8.2 trillion.

And by the end of 2016, China’s economy likely will be worth a whopping $14.93 trillion.

In comparison, the U.S. economy will grow from about $6.49 trillion to $18.36 trillion over that same period.

And I think China will overtake the United States in 2018.

With an annual growth rate in excess of 7%, China’s economy could easily double again in the next 10 years. So, with a population of 1.3 billion people with increasing wealth per capita, China can’t possibly produce everything it needs domestically.

And that’s why you see big American technology companies like Apple Inc. (NasdaqGS: AAPL) making aggressive forays in China. Apple recently announced a deal with China Mobile Ltd. (NYSE: CHL) to bring low-cost iPhones to China. And that’s one of the reasons Apple’s stock is up 15% so far this year.

And Apple is only one tech player jumping into China and other exploding markets, including India and Brazil.

Additionally, a company that could have the largest U.S. initial public offering in history is based in China. E-commerce leader Alibaba is expected to go public as early as August, and analysts say the value could be in excess of $20 billion.

Generational Bull Market Catalyst No. 2: The Record Corporate Cash Hoard

Corporate debt played a big role in the early stages of the bull market that began in 1982. Back then, there was a boom in corporate takeovers that used leveraged buyouts -or debt – to purchase target companies.

It’s a vastly different world today …

Yes, mergers and acquisitions (M&As) are once again on the rise. However, rather than using debt, these deals are being fueled by massive amounts of cash on hand.

According to Thomson Reuters, global M&A activity so far this year rose 3% from the same period last year to $1.6 trillion. Health care, which includes biotech, had the largest chunk of that, at $264 billion, more than triple the amount last year.

According to a study by business professors Amy Dittmar (University of Michigan) and Ran Duchin (University of Washington), U.S. firms are awash in cash.

In their study, Dittmar and Duchin found that, adjusted for inflation, companies had $234.6 billion cash on hand in 1980.

By 2011, the last year of their study, that number had skyrocketed to $1.5 trillion.

Of all U.S. industries, the technology sector is sitting on the biggest cash piles, with companies holding on average around 40% of their values in cash.

Much of that money will eventually flow back into the market in new products, M&As, share buybacks, higher dividend payments – and rising stock prices.

Generational Bull Market Catalyst No. 3: American Energy Independence

Because of the United States’ long-term dependence on foreign oil, many investors have forgotten just how important the nation’s energy sector really is.

We rank as the world on foreign oil, many investors have forgotten just how important the nation’s energy sector

More to the point, hydraulic fracking has ushered in a huge new energy boom. The federal Energy Information Administration now says the United States could soon become a net exporter of natural gas.

The Boston Consulting Group notes that continued drops in wholesale natural gas prices could bring back up to 5 million jobs to the U.S., many of them in high-wage manufacturing jobs.

That’s right. Manufacturing is making a comeback – great news for workers, the economy and stocks.

Indeed, according to the U.S. Bureau of Labor Statistics, more than 550,000 manufacturing jobs have been added since 2010 because of lower energy costs.

And the U.S. energy boom is being driven by breakthroughs from the technology companies we regularly follow and invest in here – everything from hydraulic fracking and to seismic maps to sensors and remote asset monitoring.

Generational Bull Market Catalyst No. 4: The Confluence of Powerful Tech Trends (Finally!)

The personal computer revolution was a key driver in the 1980s bull market.

But as many productivity gains as the PC ushered in, they’re nothing compared with the tons of tech advances now occurring daily.

What we have today is a true “confluence” of mutually augmenting tech trends – a situation I usually describe as “self-reinforcing” tech trends. By “self-reinforcing,” I mean that these trends intersect and augment each other and drive the overall sector higher.

Just take a look at the impact of the Internet of Everything (IoE). This all-encompassing technology will soon connect an estimated 50 billion devices, turning Earth into a hyper-connected “smart” planet. And it could produce as much as $14 trillion in new profits throughout the global economy over the next two decades.

This one tech ecosystem alone will touch everything: Big Data, Cloud Computing, Wearable Technology, Smart Homes, Miracle Materials, the Mobile Wave …

Plus, it will require as many as 1 trillion sensors placed all around Earth – some literally, in satellites – many of which also will help find new energy supplies.

The companies that make these sensors – and the other components of the IoE – will drive this Generational Bull Market … and benefit greatly from it.

Generational Bull Market Catalyst No. 5: Health Care and Longer Life Spans

Better health care technology and pharmaceuticals (biotech) are leading to longer life spans – and that will be a boon to the stock market.

According to the World Bank, U.S. life expectancy at birth is now 79. It was 74 in 1980, climbing nearly 7% in 30 years.

But that’s nothing compared to what’s coming. I’ve seen some radical medical treatments, still very much in the R&D stage, that could extend life to 120 and beyond.

This works out well for the stock market in several ways.

First, health care and biosciences companies are coming up with new drugs, procedures and equipment that keep people living longer – and we’re in a buying mood.

Second, the aging of America – by 2050, according to U.S. Census Bureau, one-in-five Americans will be 65 or older, and at least 400,000 will be 100 or older – is leading the need for more and more expensive health care.

And third, people are not only living longer. They are working longer.

The pollster Gallup recently found the average retirement age has climbed to 62, the highest reported retirement age since 1991, when the firm started asking this question. And younger Americans now expect to retire at 66, up from 63 in 2002.

That means workers will be investing their retirement portfolios in the stock market for longer and longer periods as the years click by. Stocks accounted for 67% of new contributions into retirement portfolios in March, according to the most recent data from experts Aon Hewitt.

In other words, workers are placing more and more of their money in the stock market for longer periods of time.

Add it all up, and that’s at least five major catalysts that will drive this Generational Bull Market for the next decade and a half – or longer.

Yes, there will be setbacks and corrections along the way. Don’t let them distract you.

If you want to improve your net worth and plan for an exciting, enriched retirement, you absolutely have to do two things.

First, make sure you are invested in the U.S. stock market.

Second, invest that money in the technology companies that will send the market zooming upward for the next generation.

Have a great weekend.

Source : http://strategictechinvestor.com/2014/06/this-is-the-bull-market-your-kids-will-be-talking-about/

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