Market Watch Weekly | September 17, 2021 | Note to Self: Become Billionaire in Any Country But China.
Erik Dekker - Sep 18, 2021
If you’ve read our last few weeks editions, you know we remain bullish, but have preached a degree of optimism that requires patience. How can that be? The first thing to recognize is that when we say we’re bullish on the market that doesn’t...
If you’ve read our last few weeks editions, you know we remain bullish, but have preached a degree of optimism that requires patience. How can that be? The first thing to recognize is that when we say we’re bullish on the market that doesn’t mean we think the stock market is going to go up every day, every week, or even every month. It wont. We suggest those in search of fiction/fantasy pick up a copy of The Hitchhiker's Guide to the Galaxy. Instead, we take a fundamental approach, valuing time in the market over trying to time the market. What we can tell you with certainty is that corrections will happen from time to time, but we have yet encounter anyone who can accurately forecast them on a consistent basis.
Without putting you to sleep discussing capitalized profit models which estimates a fair value for stocks, strategists remain bullish for three main reasons. First, long-term interest rates are low and are likely to remain relatively low for at least the next year. Second, corporate profits are very high and should remain relatively high even if they pull back from record highs as the amount of government “stimulus” wanes. Third, even if real (inflation-adjusted) GDP growth falls short of consensus expectations in the next few years, nominal GDP (which includes both real GDP growth and inflation), should remain robust due to the Federal Reserve’s overly loose monetary policy – see point one above – which will remain extremely loose even as governments around the world being tapering later this year and end quantitative easing around mid-2022.
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