Daily Gains Letter (www.DailyGainsLetter.com), an e-letter of Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is announcing its top reasons why the stock market will continue to advance as the major indices trade near record highs.
“With the bull market in its fifth year and the S&P 500 and Dow Jones Industrial Average trading at record highs, investors are increasingly optimistic,” says financial analyst George Leong. “Should the market’s rally last into August, it will be the longest bull market run in over 85 years.”
Leong explains that there are a number of economic pundits who believe the stock markets are poised for a major correction; after all, the markets continue to move higher, despite the lack of any major catalyst.
“Sure, the economy is ‘recovering,’ but there are still issues with consumer spending, especially on non-essential durable goods,” he adds. “The headline durable orders reading came in at 0.8% growth in April, above the consensus 1.3% decline, but below the revised 3.6% growth in March. For the economy to really confirm the stock market, we need to see growth here. This will also help to drive buying in small-cap stocks that trade with the economy.” (Source: “Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders April 2014,” United States Census Bureau web site, May 27, 2014; www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf.)
U.S. jobs data are beginning to look better, after the Great Recession in 2008. Jobs creation came in above 200,000 for the fourth straight month, with the unemployment rate holding at 6.3%; with the latest batch of jobs numbers, the economy has now recovered all of the 8.7 million jobs lost during the recession. Leong notes that, going forward, the Federal Reserve will likely refrain from raising interest rates until sometime in mid-2015, but will continue to cut its bond buying to zero by year-end. (Source: “Employment Situation Summary – May 2014,” U.S. Bureau of Labor Statistics web site, June 6, 2014; www.bls.gov/news.release/empsit.nr0.htm.)
“The fact there’s really a lack of investment alternatives to the stock market is helping,” Leong observes. “With the yield on the 10-year bond at around 2.5%, I doubt investors or institutions are rushing to buy; why would they when they can buy higher-yielding dividend paying stocks with capital upside?”
The renewal in the global economy is also helping, he explains. China hasn’t sunk into the economic abyss, as some pundits have been predicting, and its neighbor, Japan, is finally showing signs of economic growth following decades of doing little.
Along with the rally in the broader stock market, investors are also seeing some renewed buying action with the growth element. The small-cap Russell 2000 moved to positive territory this year and is within 3.86% of its record; the index corrected 10% a few months back.
“At this point, I suggest continuing to ride the upside moves in the stock market, but also make sure to take some profits off the table,” Leong concludes.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Daily Gains Letter, visit www.LombardiPublishing.com.
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