How long is this bull market going to last?

[piezoe]

foreign investment due to the stronger dollar

Don't take my comments too seriously, they are a bit on the facetious side. However you may have some of this backwards. A stronger dollar, ceteris paribis, should push the market down; not up, and a weaker dollar vice versa. Of course when, if ever, does ceteris paribis pertain? An of course U.S corporation earnings abroad reported in dollars makes earnings look weaker compared to prior quarters as the dollar appreciates. If you hold dollar denominated Treasuries at fixed interest you may be inclined to covert them to cash and buy hard assets to lessen your involuntary opportunity to step up your contribution to U.S. debt retirement. I anticipate both higher rates and stepped up inflation. I don't see a way forward that avoids that without risking recession -- and we don't like recessions!. We would rather borrow, buy now, and pay more later via inflation, than economize until we can afford to buy - that would be just plain unAmerican. This is no longer Calvin Coolidge's America.

I think Trump and Ryan are going to have it out before long. Ryan is a real Republican and believes in classical economics, which is wrong naturally, and we don't know what Trump is, other than he is definitely not a Republican. We do know, however, that Trump doesn't know anything except how to sell and rally the Troops, which is useful. We'll have to wait and see if there is a winner and a loser when the two lock horns, or just two losers. We are also going to find out very soon whether the House has any backbone; probably not. The next four years promise to be exceedingly interesting.

 

[Maverick74]

Don't take my comments too seriously, they are a bit on the facetious side. However you may have some of this backwards. A stronger dollar, ceteris paribis, should push the market down; not up, and a weaker dollar vice versa. Of course when, if ever, does ceteris paribis pertain? An of course U.S corporation earnings abroad reported in dollars makes earnings look weaker compared to prior quarters as the dollar appreciates. If you hold dollar denominated Treasuries at fixed interest you may be inclined to covert them to cash and buy hard assets to lessen your involuntary opportunity to step up your contribution to U.S. debt retirement. I anticipate both higher rates and stepped up inflation. I don't see a way forward that avoids that without risking recession -- and we don't like recessions!. We would rather borrow, buy now, and pay more later via inflation, than economize until we can afford to buy - that would be just plain unAmerican. This is no longer Calvin Coolidge's America.

I think Trump and Ryan are going to have it out before long. Ryan is a real Republican and believes in classical economics, which is wrong naturally, and we don't know what Trump is, other than he is definitely not a Republican. We do know, however, that Trump doesn't know anything except how to sell and rally the Troops, which is useful. We'll have to wait and see if there is a winner and a loser when the two lock horns, or just two losers. We are also going to find out very soon whether the House has any backbone; probably not. The next four years promise to be exceedingly interesting.

This is not true, wrt to the Dollar. A dollar is an asset like anything else and it can be valued as a function of two things, the cash flow it provides and it's utility to the holder. It's cash flow is it's stream of income in the form of interest payments. Stronger economies beget stronger pricing power to the firms in that economy. As pricing power goes up interest rates will soon follow. As rates go up in "real" terms, the return on holding dollars goes up.

This has all been distorted of course with the great moderation of recent years via QE and it's natural to make the incorrect conclusion therefore that lower rates equates to higher stock prices and a stronger economy. It does NOT. Lower rates equate to a flattening yield curve and weaker economic conditions and lower stock prices. Higher rates equates to a steepening yield curve and stronger economic conditions and higher stock prices. Of course they don't move lock step and the Fed distorts things from time to time.

Regarding the dollar and foreign price receipts. Yes, a strong dollar hurts multi-national companies to some extent (although most or many large firms now actively hedge currency exposure) but also a strong currency means firms can purchase cheaper imports in terms of raw material or cheap labor overseas. If managed methodically, the quants can optimize these conditions effectively by capitalizing on low labor and input costs while hedging out any currency risk from a strong dollar. It's THIS optimization that has grown earnings in recent years.

 

[lawrence-lugar]

Instead of trying to predict the far-out crazy future...try to predict how the DOW or SPY will behave during the day, before the market opens

 

[java]

The adviser simply said, Why don't we wait until after the election before we put any new money in. He never said, Why don't we wait and see who wins. It's only a Trump rally for 5 people and those are the 5 people who are on tv calling it a Trump rally. Almost every economic number for the last 8 years has been good for the market. Until that changes why worry?

 

[learner2007]

How long is this bull market going to last?

The only one who can answer that is the market itself.
So stop guessing and predicting, and listen to it, because it will tell you when it's ending/ended. That is, of course, if you understand its language. But if you don't, burning the midnight oil should help!

 

[pepper_john]

Me think it partially depends on how fast the Fed hikes the rates. I would watch the US yield curve slope closely.

 

[piezoe]

This is not true, wrt to the Dollar. A dollar is an asset like anything else and it can be valued as a function of two things, the cash flow it provides and it's utility to the holder. It's cash flow is it's stream of income in the form of interest payments. Stronger economies beget stronger pricing power to the firms in that economy. As pricing power goes up interest rates will soon follow. As rates go up in "real" terms, the return on holding dollars goes up.

This has all been distorted of course with the great moderation of recent years via QE and it's natural to make the incorrect conclusion therefore that lower rates equates to higher stock prices and a stronger economy. It does NOT. Lower rates equate to a flattening yield curve and weaker economic conditions and lower stock prices. Higher rates equates to a steepening yield curve and stronger economic conditions and higher stock prices. Of course they don't move lock step and the Fed distorts things from time to time.

Regarding the dollar and foreign price receipts. Yes, a strong dollar hurts multi-national companies to some extent (although most or many large firms now actively hedge currency exposure) but also a strong currency means firms can purchase cheaper imports in terms of raw material or cheap labor overseas. If managed methodically, the quants can optimize these conditions effectively by capitalizing on low labor and input costs while hedging out any currency risk from a strong dollar. It's THIS optimization that has grown earnings in recent years.

What I questioned was your assertion, I think, correct me if I misunderstood, that if the dollar appreciates in value the market should go up. I said that ceteris paribus it should go down; not up. And vice versa. A good example perhaps was recently when the dollar futures (DX) plumetted, perhaps in anticipation of the inflation expected due to QE , an inflation that cnever arrived, the market of course went up. For a time it simply mimicked the inverse of DX. And I think there is a perfectly sound reason for this. What do you say to that?

 

[Buy1Sell2]

Piezoe, clearly you must understand this was going to happen regardless of Trump. The Dollar broke out long before this election and that is the main driver here. In fact, the Dollar broke out assuming a Clinton victory. Everyone keeps ignoring the dollar and is falsely attributing this rally to so called "infrastructure" spending. That has NEVER propelled stocks higher broadly, only certain sectors. We are seeing major breakouts in the banks due to the steepening yield curve and foreign investment due to the stronger dollar. The only question related to Trump is will he keeps his damn hands off the steering wheel and let it go or will he inadvertently stop it.

This market was in a standstill for a year during campaign season and is now playing catch up which makes it look like this rally is all because of Trump when in reality a lot of it was the pent up demand waiting to be unleashed.

Way off.

 

[Maverick74]

What I questioned was your assertion, I think, correct me if I misunderstood, that if the dollar appreciates in value the market should go up. I said that ceteris paribus it should go down; not up. And vice versa. A good example perhaps was recently when the dollar futures (DX) plumetted, perhaps in anticipation of the inflation expected due to QE , an inflation that cnever arrived, the market of course went up. For a time it simply mimicked the inverse of DX. And I think there is a perfectly sound reason for this. What do you say to that?

Piezoe, let's play this out. You are a foreigner. You want to invest in dollars. For simplicity's sake, let's keep this down to 4 options. One, you buy dollars and treasuries. If you expect the economy to be strong with inflation to follow, you would probably not want to buy bonds. Option 2, you could buy US stocks with dollars. Again, you would do this because you think stocks are going higher. You could buy US Real Estate. Again, you would do this because you think the economy will get stronger and real estate prices will go up. You could buy a business. Again, you wouldn't do this if you thought the economy was going to get worse. The whole idea of buying "dollars" is to do something with those dollars. If you thought the economy was getting worse, stocks were dropping, real estate prices were going down and businesses were going to suffer, why would you buy dollars?

Now what has distorted this relationship the last 9 years is the Fed. Because the US Fed led this great QE moderation and provided so much liquidity, buying bonds actually made you money while the economy got stronger. This is NOT the historical norm but rather a distortion created by the FED. There is ample empirical evidence that shows that strong economies get dollar in flows and higher dollar prices.

 

[Maverick74]

What I questioned was your assertion, I think, correct me if I misunderstood, that if the dollar appreciates in value the market should go up. I said that ceteris paribus it should go down; not up. And vice versa. A good example perhaps was recently when the dollar futures (DX) plumetted, perhaps in anticipation of the inflation expected due to QE , an inflation that cnever arrived, the market of course went up. For a time it simply mimicked the inverse of DX. And I think there is a perfectly sound reason for this. What do you say to that?

http://www.investopedia.com/ask/answers/06/usdollarcorrelation.asp