Tahoe Market Pulse: Melt up lifts stocks to new highs
Some call it a “melt up,” others a “buying panic.” Call it what you will, the Dow rose nine straight days to a new high.
If thoughtful investors had real doubts about the outlook for global and U.S. growth post-Brexit, they quickly put them to rest. The killings in Nice and attempted coup in Turkey had no effect on stock markets, nor did shootings across the country.
As I wrote, the impact of the U.K. leaving the EU, both on the U.S. economy and overseas, depends on events and trade agreements that have not happened or been signed and in many cases they cannot even be imagined.
The media frenzy predicting a crash after the Brexit vote reminded me of their Y2K gloominess.
One catalyst for the surge through the old highs was last month’s employment report, which was better than expected. Not great, but far better than it was the month before, even adjusted for one-time factors.
Other economic data are a mixed bag. The economic team at the White House lowered their growth forecast for this year to 1.9 percent and over the long term to 2.2 percent, well below what is needed to boost incomes and standards of living.
Overseas, the picture is the same. Slow growth at best and the outlook is tepid, especially in those countries with aging populations and a shortage of working-age people.
Western Europe and Japan are in that camp. So is China due to years of a one-child policy. Our working-age population is rising by a token 0.2 percent.
Another possible catalyst for higher prices is the calendar. In the last 19 of 22 presidential election years, stocks rose between June and the end of October by an average of 6.2 percent.
June, July and August were especially strong. Why? I suspect because the candidates had an uplifting message about growth that played well even in good times. We could use one now.
Better-yielding stocks continue to do well with only a little profit-taking from time to time. Utility and telecom stocks have backed up just a bit as they have many times over the past three years only to move higher again.
Our many preferreds continue to edge up. Business development companies are also rising. With rates so low, investors (and insurance companies) are reaching for yield.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
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