Stocks are overpriced, the economy is still growing too slowly, and corporate profits stink. But this bull market, now nearly 7½ year old, still has room to roam.
That’s the word from my longtime favorite market strategist, Jim Stack. Stack, who edits the InvesTech Research newsletter, has become increasingly bullish in the past few months—and I think he’s right.
Why listen to Stack? Because he has a terrific long-term record. Indeed, the last time he made a big mistake was in the late 1990s, when he turned bearish too early. More recently, Stack briefly turned bearish in early 2016, but only lowered his recommended stock allocation to 65%. Soon after, the market rallied and he became bullish again. But overall, Stack has been on target or close to it with most of his market calls.
Over the past 15 years through January of this year, InvesTech’s model portfolio returned an annualized 8.7%—an average of 2.3 percentage points more than Standard & Poor’s 500-stock index. That’s based on data from the Hulbert Financial Digest, which, unfortunately, ceased publishing after February. Stack is currently recommending that clients keep 81% of their assets in stocks and the remainder in cash.
Why no bonds? “Bonds are the most overvalued they’ve been in history,” he says. With the benchmark 10-year Treasury bond yielding just 1.5%, I agree with Stack.
Stack isn’t predicting a huge run-up in stocks. He figures that stocks will produce high-single-digit percentage gains before the bull market ends, probably sometime next year. But he has been a nervous bull for years now.
Stack cites four factors behind his bullish stance: the presidential election, the Federal Reserve, the market’s technical indicators and the economy.
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