by Ian Harvey
November 21, 2019
The bullish trend shows no signs of abating, although the stock market appears to be overbought. The historic rally is far from the end of its run as traders and investors continue to position themselves, particularly after the recession panic and the continuing trade war debacle.
The S&P 500 is starting to hit peak performance with its bullishness and this is expected to continue into the early part of next year, and probably longer.
This bullish trend is driven by the “panic buying” of investors who feel they have missed out; which is a very typical situation that is found in late-stage bull markets. Therefore, even though the market appears overbought, we can expect the market to keep surging upwards, and setting new all-time highs.
With the economy poised to accelerate again, cyclical stocks, which are typically tied to economic growth, will continue to lead the way; and this bullish trend is likely to persist as we see a rebound of the U.S. economy, particularly based on certain stocks.
As the Federal Reserve has cut interest rates three times this year, to support the economy against slowdown, this should provide the effect of easier monetary policy which will flow through with a lag of about three quarters. The result should be for a strong 2020.
As well, the U.S.-China trade war, which has caused quite a bit of drama in the financial markets for nearly two years, is on the track to start easing now.
Stabilization in oil prices will also help the bullish trend to continue.
The global growth outlook for 2020 is also looking more promising.
And the seasonal strength is a benefit.
As headwinds have subsided small caps are at an inflection point and poised to outperform.
Also, a secular rotation from Growth stocks to Value stocks is beginning.
And, not only has there has been a bullish rotation into cyclicals, but also to value from growth, high beta from low volatility, cyclicals from defensives and small caps from large caps.
The American Association of Individual Investors’ weekly sentiment survey showed 40.7% of respondents are bullish, the highest levels since May, while only 23.8% are bearish, also near the lowest levels since May.
The bullish trend is expected to continue and stocks continue to rally on our strong economy, historic unemployment, near record consumer confidence, low interest rates, and impressive corporate profits.
We are witnessing history in the making. And that's why the market is setting record after record.
And the best part is that it looks like there's a lot more upside to go.
YOU NEED TO BE IN TO PROFIT!
AS ALWAYS THE DECISION IS YOURS!